Utah State University Utah State University

DigitalCommons@USU DigitalCommons@USU

All Graduate Theses and Dissertations Graduate Studies

5-1967

A Study of the Natural Rubber Industry, with Special Reference to A Study of the Natural Rubber Industry, with Special Reference to

Thailand Thailand

Suratana Vayagool

Follow this and additional works at: https://digitalcommons.usu.edu/etd

Part of the Economics Commons

Recommended Citation Recommended Citation Vayagool, Suratana, "A Study of the Natural Rubber Industry, with Special Reference to Thailand" (1967). All Graduate Theses and Dissertations. 2892. https://digitalcommons.usu.edu/etd/2892

This Thesis is brought to you for free and open access by the Graduate Studies at DigitalCommons@USU. It has been accepted for inclusion in All Graduate Theses and Dissertations by an authorized administrator of DigitalCommons@USU. For more information, please contact digitalcommons@usu.edu.

A STUDY OF THE NATURAL RUBBER INDUSTRY,

WITH SPECIAL REFERENCE TO THAILAND

by

Suratana Vayagool

A thesis submi tted in partial fulfillment of the requirements for the degree

of

~~STER OF SCIENCE

in

Economics

UTAH STATE UNIVERSITY Logan, Utah

1967

ACKNOWLEDGMENTS

The author wishes t o express his sincere gratitude to Professor

Leonard J. Arrington who gave very generously of his time and effort

including valuable suggestions and comments on this thesis, and who

has helped the author in many ways during the entire period of the

author ' s study at Utah State University.

The author is also greatly indebted t o Professor Reed R. Durtschi

for his helpful directions and criticisms which have improved the thes is

considerably fr om its earlier draft . The author a l so expresses appre­

ciation to Professo r Evan B. Murray and Professor Vernon L. Israelsen

for their participation on the thesis committee .

Specia l thanks are due to Mr . Chup Muniganonta and Mr. Suwan

Wichaidit of Rep lanting Aid Fund Office and Rubber Plantat ion Organiza­

tion and Mr. Prapat Puthisuwan who provided valuable materials and data

from Thailand .

He also wishes to acknowledge the help and constant encouragement

of his wife, Charunee Vayagoo l, in the long process of his preparing

this thesis. An yhow, he can no t forget his successful motivation which

was conducted by his daughter, Barnlulap Vayagool, during his writing

of the thesis .

Scholarship in support of the author's academi c career at Utah

State University was provided by the Thai Government. Without this

support theM. S. Program would not have been possible.

Suratana Vayagool

ii

TABLE OF CONTENTS

ACKNOWLEDGMENTS ii

LIST OF TABLES v

LIST OF FIGURES .viii

ABSTRACT ix

Chapter

I. INTRODUCTION

Origin and the Nature of the Problem Purpose and Scope

II. A HISTORICAL SKETCH OF THE NATURAL RUBBER INDUSTRY

1 3

5

General Background 5 The Physical and Chemical Material 6

Natural rubber . 6 Synthetic rubber 8

Technological Change and Development of the Rubber Industry . . . . . . . . . . . . 10

The discovery of rubber-bearing plants and the uses for rubber . . . . . . . . 10 The development of rubber processing technology. 13 Technological base for a large - scale industrial use of rubber . . . . . . . . 16 Plantation rubber in Southeast Asia and the parallel development of the mass - produced automobile . . • . . . . . . . . • . . . . • 19 lo/orld War II and the development of synthetic substitutes for natural rubber . • . . . . . . 26 Cold polymerization, new compounding materials, and the stereo-regular synthetics 28

III. ECONOMIC STRUCTURE OF THE NATURAL RUBBER INDUSTRY

Demand and Supply • . . Consumption by Regions Consumption by Uses .• Production . . . . . Production of Synthetic Rubber

32

34 38 43 48 53

IV. THE NATURAL RUBBER INDUSTRY IN THAILAND

Structure of the Economy . . ... Deve lopment of Rubber Plantations Rubber Holding . . . . . Process ing and Marketing Export of Natural Rubber Role of the Government .

Varietal and quality improvement Improvement on c ultural practice Soil fertility improvement Pests and siseas control

56

56 59 65 67 69 76

80 82 83 83

V. COMPETITIVE POSITION OF NATURAL AND SYNTHETIC RUBBER 84

Structure of the Rubber Market Technical Advantages and Di sadvantages • The Re lative Price of Natural and Synthe tic Rubber . . . . • . . . . . . . . • . . . . . The Relative Production Cost of Natural and Synthe tic Rubber .... . .

VI. THE PRESENT AND FUTURE SITUATION OF THE NATURAL RUBBER INDUSTRY . . . . . . . . .

Genera l View of Natural Rubber Producers Thailand' s Rubber Replanting Scheme Outlook for the Future of Natural Rubbe r Estimate of Natural Rubber Consumption . Estimate of Natural Rubber Production The Estimated Supply and Demand Posit i on Proposed Solutions t o the Problem

VII. SUMMARY AND CONCLUSION

BIBLIOGRAPHY

APPENDIX

VITA . .

iv

85 87

93

98

105

lOS 112 116 119 123 125 126

130

136

144

156

Table

l.

2 .

LIST OF TABLES

Rubber consumption in the United States and England and rubber supply from producing centers before 1900 . . . . • . . • . . . . . • . ... . .

Total and t ypes of rubber production by specific years, 1836-1866 (in thousand l ong t ons ) .. •.

3. Derived demand for rubbe r from the United States automobile industry

4.

5.

6 .

7.

8.

9.

10.

11.

12.

13.

14 .

Estimated new and cumu lative t otal acreage planted to rubber in South and Southeast Asia, 1904-1951 .

Production of synthetic rubber in U. S. A. (in thousand long tons) . . . . . . . . . . . . . . • . . ...

Production of synthetic rubber in Germany (Me tric tons) .

Exports of synthetic rubber from the United St ates in long tons, 1950- 1960 .... . .

Relative importanc e of natural rubber exports to the economy in 1965 . . . . . .

World consumption of rubber and percen tage shares of natural rubber , average 1959-1961 (in million long tons) .. . . . . ... .. ... .

Natural rubber imports in centrally planned economics; also as a percentage of world national rubber consumption (in thousand long tons) . . . . . . . . .

Production, consumption, and price of natural rubber in selected years , 1900-1966 •... .. •

Average consumption and regional share of new rubber consumption since 1900 ( in thousand long tons) . .

Average consump tion and r egional share of natural rubber consumption since 1900 (in thousand l ong tons).

Estimated imports of natural rubber and domestic production of Sovie t Union and Easter Europe (in thousand long tons) . . . . . . . . . . ....

v

Page

15

18

21

24

27

27

30

33

35

35

36

39

39

42

15 o

l6o

l7o

l8 o

19.

20.

21 .

Consumption of natural and synthetic rubber in Japan (in thousand long tons) o 0

Consumption of rubber in transportation and non­transportation and percentage of natural rubber to the total consumption (in thousand long tons)

Production of natural rubber in the principle producing countries (in thousand l ong tons) o o o o 0 o 0

Structure of natural rubber industry, percentage acreage of smallholdings o 0 0 0 • • ••• • •

World production of synthetic rubber 1940-1966 (in thousand long t ons) . • • . . .

Gross national product of Thailand (in thousand dollars) 0 • • 0 0 •

Percentage shares of the value of major types of agricultural produc tion in Thailand . 0 • • • •

22 . Rubber plantation areas in Thailand (in thousand

23.

24o

25o

260

270

28 ,

29.

30.

31 .

32 .

33.

acres)

Rubber holdings in Thailand, 1944 and 1945

Ownership of rubber holdings in 1949 . 0 0

Quantity and value of principal exports of Thailand from 1957- 1966 o o 0 o o o • o • 0

Annual Volume and value of Thailand's rubber exports (in se lected periods) . . 0 0 0

Principle rubbe r importing countries from Thailand (in metric tons)

Trend in the share of Thailand's export of natural rubber in total world exports (in thousand long tons)

Price of rubber, 1946 -1 965 (cents per pound) : 0 ••

Compos ition of rubber acreage in Malaya, 1966 (in 1,000 acres ) 0 o 0 0 ••• • • ••• •

Thailand's replanting area, 1961-1964

Rubber consumption per caput in 1964, for various countries (in pounds) . . . . . .

Natural and synthetic rubber consumption and percentage consump t ion of natural rubber in 1970 and 1975 (in long tons) .. .... •... 0 • • • • • • • • • •••

43

46

51

52

54

57

59

61

66

66

71

72

73

75

97

107

115

118

122

34.

35.

36.

37 .

38 .

39 .

40 .

41.

42.

Natural rubber actual supply 1962-1965 and potential supply in 1970 and 1975 (in thousand long tons) ..

l<orld consumption of natural rubber, 1900-1937 (in thousand long tons) . . . . . . . . . . . . . . ..

World consumption of natural rubber, 1938-1966 (in thousand long tons) . . . . . . . . . . . . . . ..

World consumption of synthetic rubber, 1940-1966 (in thousand long tons) . . . . . . . . . . . . . . . • .

World natural rubber production (net export) 1910- 1937 (in thousand long tons) . . . ....

World production of natural rubber, 1938 -1 966 (in thousand l ong t ons)

World production of synthetic rubber, 1940-1966 (in thousand long tons) • . . . .

Yearly average price of crude rubber (ribbed smokes sheet plantation rubber) in New York (in cent per pounds) . . . . . . . . • . . . .. . .

Synthetic rubber prices (in cent per pound)

vii

124

145

146

148

151

151

153

154

155

Figure

1.

LIST OF FIGURES

Thailand ' s rubber production and price, 1910- 1966 . . .

viii

Page

63

ABSTRACT

A Study of the Natural Rubber Industry,

With Special Reference to Thailand

by

Sur a tana Vayagool, Master of Science

Utah Sta t e University , 1967

Major Professor: Professor Leonard J. Arrington Department: Economics

The relative sha r e of natural rubber in the world's total rubber

consumption had been decreasing from 75 percent in 1948- 1949 to 44.4

percent in 1965. Since the production of natural rubber has been rising

over the same period , some pr edicti ons have been mad e indicating that

there will be a surp lus of production over consump tion of natural rubber

in th e near fut ure.

In the world output of natural rubber industry, Thailand ranks

third, being surpassed only by Malaysia and Indonesia . Of all the ex-

ports of Thailand, rubber ranks second in value and is exceeded onl y

by rice. Almost al l of the rubber plantations are less than 8 acres

in size and the prewar stock will give a low yie ld.

The purpose of this study is to evalua t e such predictions. An

attempt is als o made t o show that the rising relative share of synt hetic

rubber i n the world ' s t o tal r ubber consumpt i on has been primarily due

to the inability of the producers of natural rubber t o increase supply

in pace with the increasing demand for rubber and wi th the technological

advances in the syn thetic r ubber industry.

The study revealed that the United States and Wes t ern Europe can

be expec t ed to continue t o exercise a great influence in th e f utur e rubbe r

market as the industrial consumers absorb nearly 50 percent of the

world ' s total rubber consumption. In addition, the United States is

expected to pla y a vital r o l e as the major producer of synthetic rubber,

whic h appears t o be a critica lly important fac t or in determining the

future prospects r egarding the demand fo r natural rubber.

I t is concluded that th e t echniques of r e planting and new planting

or both, using the best available high yie lding clones would e nable

natural rubber producers to r educe the cos t of pr oduct i on enough t o

meet the keen price compe tition f r om synthe tic rubber . In the face

of the threa t ening compet ition from syn thetic rubber, the success of

the natural rubber indu s try may be measured by the extent of r ea lization

of effec tive and unremitting e fforts by the natural rubber industry.

The f uture of the natural rubbe r indu s try in Thailand, th en , de pend s

fi rst on how f ast production could be s t epped up; secondly how fas t the

cos t of production could be r ed uced by replanting with high yi e lding

clone; and thirdly on the wor ld price of natural rubbe r .

The pro j ec ti on of natural rubbe r production during the year 1970

indicates that all rubbe r produced will be sold. Synthe tic rubber

wi ll be used t o meet excess demand for new rubber during this pe ri od.

But some surpl u s of the natural rubber will occur during the year 1975.

The fu ture of the natural rubber indu s try de pends to a large degree on

lowered costs o f produc tion with r eplanting and planting with high

yielding trees , and improving the quality and marketing.

In conclusion, the p lant ing scheme now being undertaken in the

natural r ubber producing countries , wi ll be of advantage not only at

th e present but also in the f uture .

(] oh O~PPS)

CHAPTER I

INTRODUCTION

Origin and the Nature of the Problem

One of the most i mportant raw materials in the world, rub ber, is

important because of the large number of final products--Industrial,

transportational, medical, and household --which are made ou t of rubber.

It is indispensable in a modern economy, both in time of war and in

time of peace . The importance of this commodity as a raw material has

made it an object of imitation and synthetization. The wild fluctua­

tions in its price have accelerated efforts to discover substitutes.

The production of synthetic rubber took place for the first time

in Germany during World War I. This production, however, was terminated

at the end of the war, indicating that the cost of production as to

quality was not competitive with natural rubber. World War II once

again stimulated the production of synthetic rubber when the rubber

consuming countries were deprived of supplies . However, the e nd of

World War II did not bring an end to the production of synthetic rubber.

The Korean Conflict and subsequent crises have caused increases in th e

consumption of synthe tic rubber. The share of synthetic rubber in the

world ' s total rubber consumption has risen from 25 percent in 1948-

1949 to 55.6 percent in 1965.

The producers of natural rubber have watched their relative share

decline from about 75 percent in 1948- 1949 to 44.4 percent in 1965 .

This decline is a concern not only because of t he importance of rubber

as a raw material for so many products; but because rubber is o ne of

the most important, if not the most important, source of foreign currency

which the natural rubber producing countries need in developing their

economies.

Of all the exports of Thailand, rubber ranks second in value and is

exceeded on l y by rice. In the wor ld ou tput of natural rubber, Thailand

stands third, being surpassed by Malaysia and Indonesia. Thailand's

rubber industry, which centers in the south, consi s t s of some 1,800,000

acres of plantation, producing annually some 200,000 long tons of

rubber worth at present approximately $100,000,000 . This is roughly 10

percent by weight of the t o tal world natural rubber supply and 9

percent by value.

Only 5 percent of the rubber plantations in Thailand exceed 8

acres in size, and only half a dozen are in the 400-acre range . In

general, the big producers are more eff icient than the small producers.

Almost all rubber trees are of the prewar stock, irregular ly planted,

uneven in growth, and scarred in tapping. Many have been badly tilted

by the winds, and many more are badly ove rgrown with fungi and parasites.

Although the plantations are owned by relatively small producers, they

have not developed any type of cooperative arrangement for marketing

their production. This leaves th em at the mercy of the numerous layers

of middlemen who function as buyers and sellers for the rubber industry.

Because of th e above problems, rehabilitation of the rubber indus­

try has now become a matter of serious concern to t he Thai governmen t.

Beginning in 1960, it undertook a replanting scheme modeled upon the one

now being successfully completed in Malays ia. The government levies

a tax up on all rubber export s and uses the proceed -about $6 , 000,000

per year --to s ubsidize producers who are wi lling t o cut down o ld

rubber trees and plant the new high- yielding vari e ties. At the s ame

time, the Thai government has also taken o the r steps t o promote and

improve the production of rubber .

Purpose and Scope

3

The pu rpose of this thes is is to stud y the natural rubber industry

with spec ia l r efer ence t o Thailand. The competitive po t ential of

synthe tic r ubber is als o analyzed because s ynthe tic rubber ha s been

and will r emain in strong compe titi on with natural rubber.

Chapters II and II wi ll dea l with the development and c haracteris­

tics of the natural rubber industr y . Fluctuations in price , output,

volume of trade, and expor t earn i ng of natural rubber in both the

s hort-te rm and long- t erm period will be analyzed. In view of adverse

economic r epercussions of marked fluctuations of natural rubber prices

and expor t income on th e primar y producing countries, the vario us

s tabilization schemes will be considered .

Chapter IV is concerned with the role of the rubber industry in

Thailand and the relative importance of rubber t o it s future foreign

exchange . The balance of payments and economic development wi ll also

be studied. The chapter also consid er s the var i ous steps take n by the

Thai government t o promo t e and improve the production of natural rubber

in competition with synthetic rubber.

Chapters V and VI discuss the problems and the future of the natural

rubber indu s try. The r ecent discove r y of stereo synthetic rubber, the

4

replanting of high-yield trees, and chemical stimulation are evaluated .

In brief, the various economic policies affecting both the primary

natural rubber - producing countries and the wester n industrial countries

and their consequences are discussed and analyzed.

CHAPTER II

A HISTORICAL SKETCH OF THE NATURAL RUBBER INDUSTRY

General Backg ro und

Little more than a century ago , the name "rubber" was a c uri os ity.

Today, it is v ital to our exis t ence. Unlike iron , c opper, and cotton,

which have been important commodities f or centuries , the development of

the rubber industry with the consequent demand fo r the raw material

has all taken place within the last cen tury. The great growth, however,

has been in the past 60 years, the period during which the automobile

has come into so much promine nce .

The first re fe r ence t o thi s substance \'185 mentioned in Dr.

Priestley's book, Theory and Practice of Perspective, printed in 1770,

in which he s tated that there was "a s ubs tanc e excellently adapted fo r

era sing black-lead pencil marks from paper." 1 Because thi s substance

came from the land of the Indian , from that time i t appears to have

taken the name of India rubber. 2

The history of rubber is unique . No other major commodity in

\Wrld trade has experienced such dramatic and r a pid shifts in sources,

fac t or composition, and magnitudes of s upply. Few have undergone such

1H. Stuart Hotchkiss, "The Evaluation of the World Rubber Situation," Harvard Business Revi ew , II(l923-1924), 130-131.

2 Harvey S. Firestone, Jr., The Romance and Drama of the Rubber Indus -

!!Y (Akron, Ohio: The Firestone Tire and Rubber Company , 1936), p. 24.

6

significant changes in levels, technical characteristics, and industrial

derivation of demand. Shifts in world supply and demand for rubber

are invariably related to technical developments in producing, processing,

or utilizing rubber. The historic influence of technology and the

development of rubber industry to the present are an indication of the

technical and economic forces now s haping the industry's fut ure.

The Physical and Chemical Mater ial

The term "rubber" is used as a generic term encompassing not

only the "natural" product of the Heavea Braziliensis tree and other

vegetative sources, but also the ever-increasing variety of synthetic

polymers which gave properties similar in greater or lesser degree to

natural rubber. While the term "elastomer " is a far more appropriate

generic term from a technical point of view, it ha s rarely been used

outside of the industry, and not universally with in it. 3 In this study,

therefore, "rubber" will be used in its wider meaning to encompass

both the natural pr oduct and synthetic materials commonly identified

as "synthetic rubber."

Natural rubber

Chemically described, natural rubber is a high molecular weight,

terpene hydroc arbon polymer. The bas i c moecule (or monomer) of rubber,

called isoprene, is a deceptively simple-appear ing combination of five

atoms of carbon and e i ght of hydrogen . In rubber's natural or polymer

3L. R. G. Treloar, The Physics of Rubber Elasticity (London:

Oxford University Press, 1949), pp . l-2.

state, isoprene molecules are repetitively linked together in symmetri-

cal linear chains approximately 750,000 molecules in length. The

e xtent, the strength, and the symmetry of molecule chain linkages,

rather than the basic molecu lar composition, are primarily responsible

for rubber's physical properties. Until recent years, nei ther the

molecular structure nor th e resulting properties of natural rubber

4 could be duplicated in any synthesis.

Emulsion found in the roots, stumps, branches, and fruits of a

wide variety of plants contain rubber. Moyle listed 554 plants as

known rubber producers of some significance in 1942.5 Included were

numerous species of the Hevea , several species of the Castilloa of

the Mulberry family, many Euphorbiaceous plants in South and Central

America, the Fucus elastica of Asia, the Funtomia and Landolphi s members

of the Apocymaceae genera in Africa, the Panthenium (Guayule) bush of

Mexico, the Milk Weed (Asclepiadacea) and the Golden Rod of North

America, as well as the Russian dandelion, Kok-sagyz . 6 All these plants

and many others have been used or seriously considered as rubber sources ,

although their yi elds and their r elative proportions of rubber to

ex traneous matter range widely . For reason of high yield, low impurities,

4Ibid., pp . 3-4 ; and P. W. All en and G. F. Bloomfield, "Natural Rubber Hydrocarbon," and B. L. Archer and Others, "Structure, Composi­tion and Bio-Chemistry of Hevea Latex ," in L. Bateman, The Chemistry and Physic of Rubber - like Substance (London : Maclaren & Sons LTD : , 1963), pp. 1-8 and 43-45 .

5Alton Moyle, Bibliography and Collected Abstracts on Rubber Producing Plants (College Station, Texas: Texas Experimental Station, 1942), p. 8 .

6Loven G. Polhamus, Rubber: Botany, Production, and Utilization

(London: Leonard Hill (Books) Limited, 1962), pp. 31-61.

and other factors discussed below, Hevea Braziliensis is now under

cultivation on some 11,210,000 acres of land 7 and account for almost

all of the natural rubber coming on the market. 8

Synthetic rubber

8

Unlike natural rubber, " synthetic rubbe r" has no specific chemical

or t echnical connotation. In common us age it usually encompasses a

group of high molecular weight polymers which have physical prope rties

s imilar to natural rubbe r. For economic rather than technical r easons,

nearly a ll synthetic rubbe r is now manufactured from petroleum-derived

chemica l inter mediar i es. Alternative sources of the chemica l " building

blocks " requir ed for the synthes i zing of various synthetic rubbers, how-

ev er, are nume rous. Po tatoes, coal, tar, and molasses, for example,

are adequate technical substitutes and all have been used at various

times.

The variet i es and sub-varieties of synthetic rubbers have undergone

subs tantial changes over the past two decades and the t o tal numbe r of

t echnically differentiated types ha s continued t o expand . Until 1960,

much of the t echnical differ entiations could be subsumed in three

broad categories of synthetics which dominated the supply picture .

These were: (1) co - polymerized s t yrene and budadiene, a general purpos e

syn thetic which is usually considered the main technical substitute for

natural rubber; (2) the co-polymer of isobutylene and budadiene cal l ed

7Ibid., pp. 31-32. Asia 10,508,000 ac r es , America 50,000 acres, Africa 622 , 000 acres, and Oc eania 30,000 acres.

8J ean Le Bras, Introduction t o Rubber (London: Maclaren and Sons LTD . , 1963), p. 9 .

9

Bytyl or IIR; and ( 3) the polymer of chloroprene cal l ed Neo prene or CR. 9

From 1961, a new family of synthetic ca lle d "stereo-regu lar'' ha s

emerged on the scene. 10 Wi t hin this new f ami ly, three maj or types of

rubber are of gr eates t current interest: c is 1, 4 po l yisoprene , re ferred

t o as IR; cis 1,4 po l ybudadiene , cal l ed BR; and e thylene -propylene, or

EPR. These s t er eo -regular rubber s are signi f icantly different from

other earlie r synthe tics from both chemical structural and physical

ll property point of view . Thei r emergence has introduced a comp l e t ely

new economic and technical dimens i on to the wor ld rubber picture, as

wil l be discuss ed in Chapter VI.

9rn additi on to the three major synthetic rubbers, a number of more specialized synthetics should be mentioned . These incl ude Buna - N, a co­polymer of budadiene and acrylonitrile; Thiokol a polysulphide co-polymer made fro m ethylene dichlorid e and sod i um tetrasulphide s ; Vnyl ite made from ei ther vnylchloride or vnylace tate or a combination of these; Bulylite, a po l ymer of butylene dic hloride; the polyurethanes, semi ­poltmer s that have other molecular gr oup configura t i on s in addition to polymer grouping , and a number of o ther synthes ized products which are more adequately labe lle d plastics . SeeM . E. Lerner, "Rubbe r,'' in Encyclopaedia Americana, 1965, 23:745- 745f .

10ouring the Second World War, most of these synthe tics found highly specia lize d us e a s r ep l acement for natura l rubber, particularly under circumstances where cost was only a minor consideration. In the post-war period, where cos t as well a s technical qualities have been important de terminants of the ir use s , they have mai·nt a ine d, and in many circumstances expanded their level of use but on a more limited range of applications .

Natural and Synthetic Rubb er Terminology Origin Trade Names Government Classification ASTM Terminology

Buna-N GR-A or Nitrile NBR Buna-S GR- S SBR Butyl GR-I IIR He vea (natural) NR Neoprene GR-M CR Thiokol GR-P Pol ysulfide

11charles F. Phillips, Jr., Competition in the Synthetic Rubber

Industry (Chapel Hill, Nor th Carolina: The University of North Carolina Press, 1963), pp . 13-15 and Encyclopaedia Britannica, "Rubber," 1965, 19:610.

10

Technological Change and Development

of the Rubber Industry

Shifts in th e world supply of and demand for rubber have been

invariably related to technical developments in producing, processing,

and utilizing rubber. In broad ou tline, we can identify six phases in

the development of rubber industry. Each of these phases is characterized

by a particular technological change or a combination of developments.

In historic sequence, these phases are:

l. The discovery of rubber-bearing plants and the us es fo r rubber.

2. The development or rubber processing technology; solvents,

mas ticator s , and the solution spreader.

3 . A t echnological base for a large-scale industrial use of rubber

and vulcanization.

4. Systematic plantation-grown rubber in South and Southeast Asia

and the paralleling development of mass-produced automobiles.

5. World War II and the deve lopment of synthetic substitutes for

natural rubber.

6. Cold polymerization, new compounding material, synthetic

natural rubber, and the movement of synthetic from substituting to

supplanting .

The discovery of rubber - bearing plants

and the uses for rubber

Although the widespread use and development of natural rubbe r is

comparat i vely modern, rubber was known in very early times.12

There is

l2o. W. Huke, Introduction t o Natural and Synthetic Rubber s (London: Hutchinson Scientific & Technical, 1961), pp. 13 - 16; J ean Le Bras, op.cit . ,

11

some evidence, for example , that rubbe r was used for playing ball in

Ethiopia, and from there the game spread to Egypt. The use of rubber

never became widespread in Europe, however, until the nineteenth century,

and this may be connected with the distribution of rubber-bearing plants.

Natural rubber is a product of many trees and plants, but it can

only be obtained easily and in large enough quantities to make its

use worth while from a few types of trees. These trees were not very

common in the Old World, but they occurred much more frequently in the

New. It is not very surprising, therefore, that rubber has been known

and used by the natives of South America for a very long time.

Columbus is usually given credit for having been the first modern

European t o see natural rubber, and it is said that he brought back

rubber play balls which he obtained f rom the natives of Haiti on his

second voyages in 1493-1496 . The ball game had, in fac t, been known

to the Indians for centuries, as revealed by Aztec wall paintings

from the 6th Century.

It was only in 1615, however, that certain useful applications of

rubber were r evea led by Juan de Torquemada in the book Monarguia Indiana,

where an accoun t is given of the manufacture of the substance known to

the natives of Mexico as "Ulei 11 for the purpose of waterproofing

articles of clothing.

However, the interest later to be shown in Europe in this substance

and its many practical applications, and the part it was destined to play

pp. 7-9; T. R. Dawson, "Chronology of Rubber History," in P . S. Schidrowitz and T. R. Dawson (eds . ), History of the Rubber Industry (London: Insti­tution of the Rubber Industry, 1952), pp . ix-xxi i i; Hubert L. Terry, India Rubber and Its Manufacture (London: Archibald Constable & Co . Ltd., 1907), pp. 1-63 .

in the economy , was only aroused much later by two French scienti s ts,

Charles de la Condamine and Francis Fresneau.

12

La Condamine, the naturalist and mathematic ian, had been sent in

1736 t o South America by the Pari s Academy of Sciences to measur e a

meridian in the neighborhood of the equator. He and his coll eagues

collected sampl es of rubber from seve ral species of the Hevea tree and

sent them to the Paris Academy f or s tudy . He also reported the various

uses made of the substance by the natives , and observed that the same

tree was t o be found gr owing on the banks of the Amazon River. The

material was known t o the Maina Indians as "caoutchouc," a word de ­

rived f r om caa (wood) and o-chu (to flow or weep) .

Fresneau, an engineer employed by King Louis XV of France at Guiana,

spent fo urteen years l ooking for the source of natural rubber. Fresneau

described the rubber tree in detail, and gave an account of his effor ts

to discover where the tree was gr owing and how to obtain the rubber

from it. He made another very important contribution t o the knowledge

of the properties of rubber and thereby assisted in the birth of the

rubber industry.

In 1762 the name Hevea Guianensis was given t o the tree de scribed

by Fresneau . It was then quickly r ealized that rubber trees were no t

exclusively American plants and that ot he rs capable of producing the

same material existed in Africa and Asia.

Before attracting the attention of European science, both the use

and knowledge of rubber wa s large ly limited to the localized areas within

whi ch wild rubbe r-producing plants were found. Practical us es included

crude foot coverings and water - proof ing for rain caps. But little trade

and no evidenc e of organized production in the America before the eighteenth

13

century was known. The consumption of rubber in Europe, limited by the

lack of knowledge and of interest, was undoubtedly measurable in pounds

per year until the latter part of the eighteenth century .

The initial movement of rubber into interna ti ona l trade channels

stemmed from the European discovery i n the la tter decades of the

eighteen th century of an i nc r easing number of pra c tical uses for this

unique mate r ial. Among the first applications of rubber were those

in medicine (syringes, small tubes, and surgical pr obes). In all such

earl y uses of rubbe r, the shape of the manufactured product was depen­

dent on the original shape or form of rubber as it came out of the

jungle . While such limitation seve r e ly limited the range of products

that cou ld be made, demand gr ew s l owly but steadily a s a result of

rubber ' s physical properties which could not be duplicated by anot her

material .

The development of rubber

processing technology

With the discovery of a solvent for rubber befor e the turn into

the nineteenth century the way was opened for rubber manufacturing .

In conjunction wi th the deve lopment of a rubber so lution spreader,

the a bi lity t o d iss olve rubbe r and apply it to fabrics opened a whol e

new range of app lication s for rubber as a raw ma t erial . At abou t the

same time a mechanical rubber masticator was developed which not only

permitted the continuous r eworking of rubber into a plastic state without

destroying its ultimate phys i cal qualities, bu t also established the

t echnical base by which othe r material could be "compounded" with

14

rubber. l3

The new technological base for working rubber, and the increasing

variety of products which could be made , generated an increasing demand

for rubber as an industrial material. Shoes, waterproof garments (in-

e luding the famous Mackintosh raincoat), and a growing number of commonly

used rubber products began to enter the market in significant quantities.

Whereas the demand for rubber in the late eighteenth century probably

never exceeded several thousand pounds a year, by 1820 consumption in

Europe and the Uni t ed States was at the rate of 100 t ons annually . 14

By the late 1830's international trade in rubber was sufficiently im-

portant t o warrant the development of secondary rubber markets in both

New York and London (see Table 1).

Despite the growth in demand r es ulting from new processing and fab -

ricating t echniques, rubber still presented both the fabricators and th e

end users with serious problems . On hot days, it became sticky and

adhesive as well as malodorous. Direct sunlight resulted in rapid

deterioration . And when rubber was exposed t o low temperature it became

stiff and non-elastic. Users soon discovered that rubber retained its

most useful and desirable physical properties within narrow t emperature

ranges, a severe limitation on its us e in either hot or cold weather.

While the demand for rubber continued to grow , consumers of the increasing

l3French chemis ts Louis Antoine Prosper Herissant and Pierre Joseph Macquer found " turpentine and ether" could be used as solvent s in 1763 and later in 1819 Charles Mackintosh used "naphtha" as a solvent. Thomas Hancock's 1819 machine for a modern internal mixer was called the "pickle. "

14 No pre -1 825 rubber trade statistics are available.

Table l. Rubber consumption in the United States and England and rubber supply from pr oducing centers before 1900. The figures are average for each decade except for odd years (in tons)

Im2ort Ex ort Gold Sierra Belgiam

Year u.s .A. U. K. Brazil Coast Nigeria leone Congo Ceylon Far East

1830 23 150

1840 307 400

1850 385 1,500

1860 750 2,152 2,700

1870 4,296 7,656 6,600

1878 223

1880 8,109 8,479 5,928 0 . 5 450 135

1884 750

1888 392

1890 15,336 13,200 1,500 450 200

1895 18,646 17 , 078 27,355 l, 796 2,322 625 670

1898 2,672 2,054 275 2,150 4

1900 22 026 25 664 23 918 l 271 123 5 511 821

Source: M. J. Dijkman, Hevea : Thirty Years of Research in the Far East (Coral Gab l es, Florida: University of Miami Press, 1951), p. 6.

~

V>

16

number of r ubber goods , particularly in the United States, were l os ing

enthusiasm for products that were usable onl y under certain temperature

condi ti ons .15

Technologica l base for a large - sca l e

industrial use of rubber

The basi s fo r the modern rubber manufacturing industry was e stabl-

l i shed in 1839 when Charles Goodyear discovered a means of permanently

altering the physical proper ties of rubber by heating it in combinati on

wi th su lphur. 16 The pr ocess , called vulcanizati on, transformed rubber

in t o a far more useful material. It became far s tr onger and durable;

it maintained its elasticity and pliability within a wide -temperature

range; and it lost its odor and surface adhes iveness. The discovery

of the vul canization process stands out as one of the major developments

in nineteenth century t echnology. It also marks the beg inning of a

stage of rapid and sus tained growth for the rubber industr y that contin-

ued wi th on l y minor interruption for the rest of the century.

Demand fo r raw material a s a r esu lt of this rapid proliferation of

new rubber products and expansion o f manufac turing activ ities gr ew

tremendou sly in bo th the United States and Europe. By the end of the

15A number o f American rubber goods manufac turing companies e stab­lished in the first decades of the 19th Century went into bankruptcy largely as a r esult of consumers 1 r eactions t o their products under "ho t" and "co ldu weather conditions.

16Although some chemist s were on the track of vulcanization prior

to 1839, including Fr ederic Lude rsdorff (German), J. van Geuns {Dutch) and Nathaniel Hayward (American) it r ema ined for Good year t o make it a reality. But Hancock secured the English patent right t o it in 1843. See Lerner,~ .• p. 740.

17

century, annual world consumption of raw rubber had increased ove r

five hundred - fold over 1820 l eve l s to a r ate of approximately 50,000

t ons (see Table 2).

Stimulated by, and coincident al with the high price,17

the sea r ch

fo r new supplies of wild rubber i n the la t e decades of the century

marked the beginning of the systema tic s tud y of the bio-genesis, physi-

o l ogy , and eco l ogy of rubber - bearing plants and the first attempts to

cu ltivate sever al of them on a systematic basis .

Ec onomically , the most no t eworthy c haracteristic of "wild " rubber

production was the intensive use of labor. Direc t labor inputs in

loca ting , tapping, and coagu lating wild rubber comprised all but a

smal l proportion of t otal production cos t s in mos t areas. This labor -

intensive characteristic provided the economic base for substantial

rubber output fr om several low yielding r ubber plants in Af rica and

Asia during the late nineteenth century when an acute physical shortage

of labor rathe r than the lack of wild rubber-bearing trees was the mo s t

important limitation on Brazil's capacity to produce increas ing supplies

of rubber . 18 In the case of Africa and Asia where the labor was r e latively

17The average declared value of United Kingdom import s in Sir Andrew McFadyean, The History of Rubber Regulation 1934-1943 (Lond on: George Allen & Unwin, Ltd., 1944), pp . 19-21 , showed the following pric es per pound:

1830 ls .3d. 1870 2s.Od. 1900 2s. 6d . 1903 2s.6d. 19 14 1840 ls.3d. 1880 2s.6d . 1902 2s.3d. 1910 5s.3d. 19 16 1850 ls.6d. 1890 2s.3d. 1904 2s .9d. 1911 5s.6d . 1918 1860 2s .Od. 1895 2s.Od. 1906 3s.Od. 1912 4s .9d. 1920

18c. E. Akers, The Rubber Industry in Brazil and the Orient (London: Methuen & Co., 1914), p. 1.

2s . 3d. 2s . 9d. 2s.3d. ls .9d.

18

Table 2 . Total and types of rubber production by specific years, 1836-1866 (in thousand long tons)

Year

1825 1830 1835 1840 1845

1850 1855 1860 1865 1870

1875 1880 1885 1890 1895

1900 1905 19HJ 1915 1920

1925 1930 1935 1840 1945

1950 1955 1960 1965 1966

Wild rubber

0.1 0.2 0 . 1 0.4 0.6

1.5 2.2 2.7 3.5 6.6

8.0 9.7

12.0 17.9 26.1

43.3 62.1 82.0 50.0 37.0

42.0 20.2 17.7 26.0 47.1

26.9 26.0 29.7 38.5 32.5

Plantation rubber

0.5

0.8 0.5 0.8 0.5 0 . 5

0.8 0.1

11.0 115.6 319.6

482.9 805 . 9 854.9

1,391.5 202.9

1 , 833.1 1,891.5 1,972.8 2,292.2 2 375.5

Synthetic rubber

42.4 866.1

534.6 1,085 . 3 1,892.5 3,015.0 3 318.0

Total world production

0.1 0.2 0.1 0.4 0.6

1.5 2.2 2.7 3.5 7.1

8.8

10.2} 12.8 18.4 26.6

44.1 62.1 93.0

166.6 353.6

524 . 9 826.1 872.6

1,459.9 1,116.1

2,394.6 3,002 . 8 3,895.0 5,343.0 5 726.0

()Q"'

" 0 " 0 3 " 11> "' " -"' "' " :r " 0 0.11>

"' 3 • 11> 0 .: ::l'O>

" " " 11> .... " 0'0

"" ... o

"' .... 0 '< 0 .... 11>

> " "' 0 3 0 cr .... .... 11>

" " a.

" .... " 11>

"'

0 H>

Source: 1825-1900 from G. L. Wallace, "Statistical and Economic Outline," in P. Schidrowitz and T. R. Dawson (eds.), History of the Rubber Industry (London: Institution of the Rubber Industry, 1952), p . 86. 1905 from H. Stuart Hotchkiss, "The Evolution of the World Rubber Situation, " Harvard Economic Review, II(l923-l924), p. 130. 1910-1935 from George Rae, "Statistics of Rubber Industry, " Journal of the Royal Statistic Socie ty, Part II(l938), p. 345. 1940- 1966 from Rubber Statistical Bulle tin, several issues .

19

plentiful and cheap it became economically feasib l e to utilize higher

physical labor inputs in securing a given we ight of rubber from many

low-yielding rubber plants. The wild fig (Ficus elastic) and the Urceola

elastica vines in Asia, the Clitandra vines found throughout most of

tropical Africa, and after 1883 the Funtumia e lastica (Kickseia) were

examples of relatively poor yields which became commerical sources of

rubber in the 1890's. The economic advantages of low cost labor19

appeared to have been so s ub s tant ial that s hipment s of African and Asian

wild rubber to wo rld markets expand ed rapidly after 1880. By 1900

Africa alone was producing more than a third of world supplies, as Table

2 indicates .

Planta tion rubber in Southeast Asia and

the parallel development of the mass-

produced automobile

Rapidl y increasing demand in the face of the short-run upward

inelasticity of wild rubber supplies had already led to record price

levels when new technical developments in both the supply and the demand

side of the industry formed the basis of the fourth phase of rubber's

history. On the demand side, the f ir st facto r was the development in

the initial decades of the twentieth century of t he automobile industry,

primarily in the United States, with its needs for rubber tires, gaskets,

tubing, and other items. The derived demand for rubber s t emming from

the expansion of the automobile industry for overshadowed anything

that had ever been known in the industry before. Automobile manufactures

19Ibid . , p. 25.

20

which had used practically no rubber in the 1880's and only a few t ons

in 1900, consumed 5, 110 t ons, r epresenting 70 t o 80 percent of all

rubber produced in the world, by 1910 .

Rubber has always been a minor material in an automobile (usually

amoun ting to less than 4 t o 5 percent of the total weight and r are l y

exceeding the same percentage of total cost. 20 The absolute quantit y

of rubber consumed in the i ndus t r y gr ew large because the production of

cars grew large . To apprec iat e the r ela tionship of the automobile in-

dustry to the incr eas ing demand for r ubbe r in the f i rst fou r decades

of the twen t ie t y century, Table 3 provides a r ecord of the production

of mot or vehicl es in the Unit ed States from 1900 t o 1940 and es timated

demand for rubbe r derived f rom the i ndu s try alone . The derived 1915

demand for rubber in the American automobile alone was grea t e r than the

t otal aggregate supply for rubber in the world in 1900.

The rapid esca lation of derived demand fo r rubber s t emming from

the gr owth of the automob ile industry began at a time when high prices

and sever e shortage s had already led t o wor ld-wide searches fo r new

sources of rubbe r . Only the development of a substantial plantation

industry in South and Southea s t Asia enabl ed supply t o expand rapidly

enough t o f ill demand. Demand deve l s exceeded 100,000 t ons by 1912 ;

200,000 by 1916; 300,000 by 1919; and 1,000 ,000 t ons by 1930 . According

20In addition t o tire s the r e are numerous other uses for rubber in the modern automobi l e. In the average Ameri can passenger car, this adds up t o 175 pounds or mo r e per car , including tires, for 1967 models . Fr ed Olmsted, " Rubber in the 1967 Automobile ," Rubber Age , XCVIII(l966), p. 68 . The f irst models at the turn of the century used less, but 60 pound s i s pe rhaps the l owes t amount ever used in the standard automobile, and the amount t ends t o increas e steadily over the years . The 1942 mode ls used approximatel y 171 pounds of rubber . W. S. Woyt insky and S. E. Woytin sky, 1-lorld Population and Production (New York: 20th Century Fund, 1953) , p . 1168.

21

Table 3 . Derived demand for rubber from the United States automobile industry

Aut omobi les manufactured, Estimated derived demand for Year in thousands rubber in short t ons

1900 4 120

1905 25 750

1910 187 5,110

1915 970 48,500

1920 2,227 220,000

1925 4,266 596,000

1930 3,356 568,000

1935 3,947 673,000

1940 4,472 760,000

Source: T. R. McHale, "Changing Technology and Shifts in the Supply and Demand fo r Rubber a:1 Analytical History," Malayan Economic Review, IX(l964), p. 41.

to Jean Le Bras's comment:

This shortage of raw material and the resulting increase in the market value of rubber were, of nee• essity , a considerable hindra nce to the rubber in­dustry. However, by a strange coincidence, just as the development of the motor car increased demands, still further plantation rubber began to appear on the marke t . 21

The emergence of cultivated Hevea Braziliens i s as the dominant

source of rubber, and the geographic shift of the supply locus from

South America and Africa to South and Southeast Asia, was preceded by

several decades of botanical trial and errors in cultivating rubber -

21sras, £E..:......£i£ . , p. 14 .

22

producing plants in many parts of the tropical world. Although intro­

duced as a cultivated plant into South and Southeast Asia on an experi ­

mental basis in 1870, large-scale planting of Hevea were not attempted

until the twentieth century.22

By t he end of the f irst decade of the twentieth century, organized

production of plantation rubber in South and Southeast Asia had clearly

demons trated economic advantages over the traditional methods of collect -

ing rubber f r om wild plants: at about the same time the botanic superi-

ority of Hevea Braziliensis as a cultivated rubber producer was also

becoming widely apparent . 23 Once it began, the shift in supply source

from wild rubber -bearing plants to the systema tic cultivation and tap­

ping of Hevea Braziliensis proceeded rapidly . The emergence of South

and Southeast Asia Hevea plantat ion r ubber to dominance in the world

supply picture can be seen in Table 2.

The shift from wild to plantation rubber involved a dramatic shift

in the geographic locus of production. It also involved fundamental

changes in the nature of factor input, fac tor proportions, and the

organization characteristics of the productive proceeses. The shift

from labor-intensive to capital intensive production was of particular

significance . While land in South and Southeast Asia was relatively

plentiful, the cos t of c l earing , plant ing, and cultivating land, es t ab ­

lishing labor lines and engaging managerial ski ll over six or seven

unproductive years, had t o be capitalized. The production of rubber

22Ibid., pp. 19- 35.

23Polhamus, ~., pp. 28 - 29 and 62 -90.

23

per tree during the early plantation period began at several hundred

pounds and rapidl y exceeded 1,000 pounds per years. Consequently labor

inpu t s in the tapping, col l ec ting , and coagulating of rubber is very

low compared t o wild rubber cost where the average individual tapper

rarely had an out put in excess of 100 pounds per year.24

World-rubber price had remained around 60 cents per pound in the

decade 1895-1904 as plantation cultivation of Hevea expanded s l owl y

but steadily in South and Southeas t Asia. In 1905-1906 r ecord high

prices had substantial impact on world rubber s upplies. A rubber

planting boom, fi nanced in large part by London speculators and later

joined by Amsterdam speculators, was under way. Rapidl y increas ing

demand for rubber as a result of g rowing needs in the American aut o

industry, and the inability of wild rubber production to meet the require-

ments sent r ubber prices skyrocke ting t o mere than $2 a pound in th e

Uni t ed States in 1910 and 1911. The impact of the spectacu lar price

rise on rubber planting in South and Sou theast Asia is indicated in

Table 4.

Consumers of rubber in the United States, Germany, Russia, and the

Uni t ed Kingdom wer e all faced with the f act that rubber's t echnica l

value in us e stemmed from a unique set o f prope rties possessed by no

o the r known material. Elasticity, res iliency, extensibility, and capa-

city to absorb shock were the most important of thes e general properties,

but highl y specific ones like inertnes s , impermeability t o water and

numero us other liquids and gases, high fictional r es istance when dry,

24 T. R. McHale, "Changing Technology and Shifts in the Supply and

Demand for Rubber, an Analytical History," Malayan Economic Review, IX(l964) , p. 33 .

24

Table 4 . Estimated new and cumulative total acreage planted to rubbe r in South and Southeast As ia, 1904-1951

Year Annual elanting acres To tal acres

1904 and earlier 50 ,000

1905 100,000 150,000

1906 200,000 350,000

1907 200,000 550,000

1908 200,000 750,000

1909 300,000 1,050,000

1910 400,000 1,450,000

1911 400,000 1, 850 , 000

1912 400,000 2,250 , 000

1913 250,000 2 ,500,000

1914 250,000 2,750,000

1915 250,000 3,000,000

Source: Statistics Relating t o the Rubber Industry issued by the Rubber Growers Assoc iation, Inc., London, 1928, p . 7.

non-conductivity to e lectrici ty, and l ow conductivity to hea t were of

particular value for some uses. Functional ana l ysis, never theless ,

suggested that some qualities were neither needed nor desirable in many

uses ; f urthermore, alternative synthetic mater ials were known that

uould be able to fi ll many of specific functions of natural rubber

ad equa t e ly, particularly if costs were not considered.

While the development and expansion of synthetic rubber production

facilities included a number of synthetic rubbers which we r e usuall y

25

described as general purpose rubbers, budadiene - styrene co-polymers,

now referred to as SBR, were considered the most important substitutes .

Of all the available synthetics, they possessed the greatest balance

of functional qualities sought in the widest range of applications.

SBR rubbers were super i or to natural rubber in on ly a few minor ways

but, for most heavy volume use, they provided an adequate substitutes

for natural rubber. 25

Not only was the South and Southeas t Asian rubber supply potential

far greater than anything known, but it was also technically, organiza-

tionally , and economically different from the wide rubber supply

complexes of South America or Africa. Systematic planting, cultiva-

tion, and tapping tied up large amounts of capi tal and labor over long

periods of time. Direct labor inputs in the tapping and processing ,

on the other hand, were reduce d from a dominent cost input to a minor

cost input on a typical plantation. The increasing level of f ixed

cos ts involved in rubber production and the decreasing level of variable

costs in the form of direct labor inputs mean t that rubber supplies

were becoming far more inelastic than they had been when wild rubber,

with its low capital commitment and highly variable direct labor input,

dominated the scene. 26

25 R. F. Dunbrook, "Historical Review," in G. S. Whitby and Other

{eds.), Synthetic Rubber {New York: John Wiley and Sons, Inc., 1954), pp. 32 -5 5; Phillips,~., pp . 10-15; Huke, ~., pp. 27-65.

26The emergence of the smallholder changed this to some degree.

World War II and the development of

synthe tic substitu tes for natural

rubber

26

The fifth phase in the history of rubber began during the Second

World War. With the world ' s largest consumers of rubber effectively

cut off from the major Southeast Asian producers, alternative sources

of natural rubber supplies or alternative material that could replace

natural rubber had to be found without delay. The seven years gap

between planting Hevea andlits'initial tappability, the limited pros­

pects of any dramatic increase in wild rubber supplies, and unpromising

prospects for semi-tropical or temperate vegetative sources forced all

major consumers to seek a solution to their prob lem in development of

"synthetic" s ubstitutes rather than in new vegetative sourc es of natural

rubber.

Working with synthetics during the war led to the identification

of limited areas where synthetics possessed technical advantages over

natural rubber. In th e immediate postwar period, however, when free

choice between natural and synthetic rubber became possible, the heavy

demand for natural rubber reflected its technical and cost advantages

in all large volume usages.

While the so - called speciality synthetics , like CR, IIR, and NBR

appeared capable of holding and expanding a relatively low vo lume

technical market, the future of general-purpose SBR was clearly in

doubt in the early postwar year--particularly in the United States.

Wartime research and development had led to a number of substantia l

i mprovements in processing and f abricating SBR, but it still appeared

unable to compete, even at a significantly lower cost, with natural

27

Table 5. Production of synthetic rubber in U.S.A. (in thousand long tons)

SBR CR IIR NBR Year (GR-S) (Neoprene) (Butyl) (Nitrile ) Total

1940 2.5 0.1 1941 .2 5.4 0 2 . 5 1942 3 .7 9.0 9.7 1943 182.3 33.6 1.4 14.5 231.8 1944 670.3 58 . 1 18 . 9 16 .8 764. 1

1945 719 . 4 45.7 47.4 7.9 820.4 1946 613.4 47 . 8 7:J. l 5.7 740 1947 407 .8 31.5 62.8 6.6 508.7 1948 393 . 9 34.8 52.6 7.0 488.3 1949 295.2 35.2 52 . 2 11.1 393.7

1950 358.2 50.1 55.8 12 .0 476 .1 1951 696.8 58 . 9 74 . 1 15 .3 845.1 1952 637.2 65.7 79.4 16.2 798.5 1953 669.2 80.5 78 . 5 20.2 848.4 1954 474 . 2 69 . 2 58.1 21.4 622.9

1955 791.2 91.4 55.3 32.6 970.5 1956 871.2 99.4 75.0 34.0 1 ,079 .6 1957 907.5 110.7 67.0 33.0 1,118.2 1958 872 .6 97.8 52.2 32.0 1,054.6 1959 1,130. 7 124 . 8 81.0 43.2 1,379 . 7

1960 l 166.2 134.4 98 . 0 37 . 9 l 436 . 5

Source: Rubbe r Stat is t ical Bul l etin, Vol. 6 , No. l , Oct., 1951; and Vol. 15, No. l, Oct., 1960 .

Table 6 . Producti on of synthetic rubber in Germany (Metric tons)

Numbered Year Buna-S t y2es Buna -N Buna s Total

1937 2,110 400 637 3,147 1938 3,994 640 848 5,482

1940 37,137 1,898 1 , 431 40,466 1941 65 , 889 2,631 1,955 70.475 1942 94, 166 2,824 2,721 98,711 1943 110,569 3,656 3,388 117,613 1944 97 493 3 172 2 590 103 255

Source: R. F. Dunb r ook, "Histor ical Review , 11 in G. s . Whitby and Others , S~the tic Rubber (New York: John Wiley & Sons , Inc . , 1954), p. 53.

28

rubber in any large volume. Fear that most of the synthetic rubber

industry established dur ing the war in the Uni t ed States would face

imminent economic collapse in the postwar years prompted legislation

(the Rubber Act of 1948, Public Law 469 of the 80th Congress) designed

to ensure survival of the industry. The law, which was to be adminis­

t ered by the De partment of Commerce , r equ ired rubber manufacturers t o

use a certain percentage of synthetics in various rubber goods in ord er

to keep aggregate demand up to a specified level . With the technical

development, however, the legislation proved unnecessary and the law

had no impact on the industry.

Cold polymerization, new compounding

materials. and the stereo-regular

syn the tics

Polymer research ha s resulted in a continuous flow of new synthe­

tic rubber type. Three major technical developments came into the pic­

ture of Amiercan synthetic rubber. 27 The fi rst discovery technique

was the low t emperature polymerization of s tyrene and budadiene in

replacing a high temperature polymerization process which had been

used during the war because it permitted maximum output in the shortest

time . The discovery of a relatively quick "cold" polymerization process

in the immediate postwar years l ed to the production of a SBR with

great ly improved abrasion and aging resistance both substantial l y

superior t o natural rubber without a major increase in production cost.

Cold SBR soon demonstrated advantages over natural rubber in automobile

tire treads, and rapidly gained a major place in this important market.

27McHale, ~., p. 37-39.

29

The second important technical change in the industry was the

development of "oil extension: a technique which permits the incorpora-

tion of substantial quantities of low cost mineral oil additives t o the

various polymers and at the same time improving physical performance

characteristics.

The third developmen t was the discovery of the key role played in

rubber compounds by the particle size of carbon black fillers. The

carbon black permitted more effective heat dissipation within the

rubbe r compound.28

This latter t echnique was of interest to the f abri-

cators of all types of rubber, including natural. It was of par ticular

importance t o SBR users since internal heat .build - up was SBR' s major

problem in tires.

These three discoveries pr ovided synthetic SBR with a capacity not

onl y to survive but zlso to carve out a subs t antial share of the total

rubber market in the United States on both a technical and a cost basis

during the 1950's. SBR accounted for the larges t abso lute contribution

to this growth pattern. It indicated similar trends in the United

Kingdom, Germany, and France - -and in the world. 29 The rapid growt h of

synthe t ic rubber exports from the United States to world markets is

indicated in Table 7.

Despite the rapid absolute and relative growth in demand for syn-

thetics during the 1950's, natural rubber still held t echni cal advantages

28carbon black is a key reinforcing fil l er in making the rubber compound increasing the tearing resistance of rubber, natural and es ­pecially for SBR. See Bateman,~., pp. 316-327 and G. S. Whitby (ed.), Synthetic Rubber (New Yo rk : John Wiley & Sons, Inc., 1954), pp. 384-413.

29Tbid . , p. 37.

30

Table 7. Exports of synthetic rubber from the United States i n l ong tons, 1950-1960

Year SBR IIR NBR CR Total

1950 900 31 1,895 4,826 7,652 1951 483 216 l , 725 6 ,825 9,249 1952 9,467 126 2,695 9,813 22' 101 1953 . 7,692 237 3,245 ll , 494 22' 668 1954 ll ,069 2,831 4, 155 12,062 30' ll 7

1955 60,704 9,895 4 ,593 18 '098 93,290 1956 112,366 8,699 6 ,194 21,909 149,168 1957 158,030 8,835 6 ,3 77 30,206 203 '448 1958 142 ,069 l3' 793 6 , 718 31,337 193,917 1959 220 , 493 21,8ll 8,374 39,790 290 ,468

1960 257,028 29' 646 7,699 47,581 341,954

Source: Rubber Statistical Bulletins, XV(Jan. 1961), XVI ll(Jan. 1964).

in sev e r a l important uses where it s s tereo -regu lar po l ymer cha ins gave

it proper ties that could not be dupl ica t ed by any synthetics. This

advantage lasted until 1955 when t he discovery of the means of regula-

ting the positioning of polymer molecules moved to be as econ om ically

significant as it was t echnically impressive. The commercia l production

of this new genera l category of syn the tic was first announced in 1959. 30

This synthe ti c, refer r ed to as the stereo-regular, changed the entire

competitive picture in the rubber industry. The deve l opment of stereo -

regular has almos t breached the last significant technical strong hold

of natura l rubber.

30 Phillip, ~-, p. 13-14.

31

Three stereo -regular rubbers are now being produced in significant

quantities in the United States and Europe. 31 If the cis 1,4 polyisoprene

is from a chemical stand point a synthetic "natural" rubber, in physi-

cal porperties it approximates natural rubber. Another stereo synthetic,

cis 1, 4 polybudadiene, is chemically dissimilar to natural rubber but

looms as a major economic and technical threa t in the automative tire

field because of substantially superior physical wear advantages over

natural rubber in almost all important func tional uses. A third stereo

synthetic, ethylene- propylene rubber or EPR, is potentially the most

inexpensive general -purpose rubber on the horizon and has attracted

wide -ranging attention despite its newness and the fact that it is

stil l not available in large commercial quantities.

31Richard A. Arnold, "The World Stereo Homopolymer Rubbers, " 54, 1966, pp. 59 - 63 .

CHAPTER III

ECONOMIC STRUCTURE OF THE NATURAL RUBBER INDUSTRY

Natural rubber is grown only in developing countries and consumed

almost exclusively elsewhere . In 1959-1961 less than 5 percent of

total output was consumed in countries where rubber is grown , 73 percent

was exported to developed and 21 percent to centrally planned countries.l

Most of the natural rubber produced is from Southeast Asia . It can be

seen in Table 8 that for most of these countries natural rubber is a

major foreign exchange earner, and for some of them a very important

source of national income and therefore furnishes one of the major

opportunities for emp loyment and economic deve l opment. On the whole

it can be said that for most countries in Southeast Asia natural

rubber is one of the main pillars of the economy.

As Table 8 indicates, over two thirds of the total export earnings

were attained through the exports of natural rubber in the Federation

of Malaya, Indonesia and South Vietnam. In the other two nations

whic h owe sizeable proportions of their exports t o rubber, the percen-

tages were about 16 percent. Therefore, Mrs. M. J. 't Hooft Welvaars,

of Amsterdam University, described the role of natural rubber in develop-

ing countries as:

1F.A.O. Commodity Review-Special Supplement, Trade in Agricultural

Commodities in the United Nations Development Decade, Vol. l (CCp 64/6), 1964, p. II - 101.

33

Table 8. Relative importance of natural rubber exports t o the economy in 1965

Ne t export volume Percen tage of t o tal Rubbe r export (in thousand long export in natural as ~ercent

Country tons) 1 rubber2 GNP

Malaya 860.7 42 . 1 17 .0

Indones ia 705.7 35.04

Thailand 213.1 15.5

Ceylon 116.4 15.6

South Vietnam 60.0 71.4

Source: 1 . 2. 3. 4.

Inte rnational Rubber Stat ist i cal Bu lletin . International Financial Statistic. U.N. Yearbook of National Account Stati s tic . Britannica Book of the Year 1967, p. 411 .

(a ) providing a livelihood fo r many people , (b) being a major foreign exchange earner for producing countries. To this can be add ed that at present (c) na tural rubbe r provides a considerable part of govern­ment revenue in the producing countries by paying export taxes (and/or other taxes) .2

To the deve l oped countries, J ean Le Bras indicated that :

There are more than 1,000 rubbe r factories in the United State s, employ ing some 250,000 workers. The most important city is Akron, Ohio, principal rubber manufac­turing center . . . . The Canadian industry is close l y linked t o that of the United States and possesses some

2 .5

3.9

1.3

80 f actories and employs more than 25,000 workers, its principl e center be ing Toronto . In Europe, t he British rubbe r indu s try i s the oldest and most impor t ant. Official Statistics show that there are more than 200 enterprises operating over 300 factories and other es tablishments sca tte r ed throughout the United Kingdom. The smallest

2united Nations Confe rence on Trade and Deve l opment (hereaf t er referred to UNCTAD), The Inte rnational Organization of Commodity Trade Case Study of Natural Rubber, TD/B/AC. 2/4 , 4 January , 1966, p. 11.

of

34

en t erprises employs more than about 25 persons, the largest being staffed by over 4,000 .... In Western Germany, ther e are about 200 factories employing about 72,000 workers ... . In France, the r e are now some 400 factories employi ng 50,000 workers, these figures being indicative of the continued importanc e of small scal e manufacture . ... Me ntion may al so be made of other countries, such as Japan, Italy and Russia .3

Demand and Supply

The greatest portion of t otal natural rubber exports are consumed

annually by the United States , the Wes t e rn Europe countries, and

Japan . Only in r ecent years have the cen trally planned countries

increased consumption in natural rubber . An insignificant portion of

natural rubber production has been consumed within the rubber producing

countries ( see Tables 9 and 10) .

The change in the demand condition a ffec ting warld trade in

na t ural rubber during the past five decades has had enormous economic

r epercussi ons on the maj or produ c ing countries in the reg i on. Th e

heavy r e liance on rubber demand from the deve loped nation s thus has

3Le Bras,~., pp. 91-93 . The names of major important rubbe r manufacturing firms in various countrie s are:

U.S.A. - Goodyear Tire and Rubber Co. - The B.F. Goodrich Co . - The Firestone Tir e and Rubbe r Co. - The United States Tire and Rubber Co. - The General Tire and Rubbe r Co.

U.K . - Dunlop Rubber Company Western

Germany - Continental Gummi - Werke A.G. - the Phoenix Gummi - Werke A.G.

France - Rattier and Guibal - Michelin Tyre Factory - the Bergougnan Factory - the Dunlop Factory

35

Table 9. Wor ld consumption of rubber and percentage shares of natural rubber, average 1959 -1961 (in million long t ons)

Percent of Natural S:i!!thetic Total natural

Developed countries 1.43 1. 68 3.11 46

Dev e loping countries 0.22 0.08 0.30 73

Cent ra ll y planned countries 0.49 0.48 0.97 50

World 2.14 2.24 4.38 49

Source: F.A.O. Commodity Review--Special Supplement, Trade in Agricul­ture Commodities in the United Nations Deve lopment Decade, Vo l. 1 (CCP 64/6), 1964 . p. II-103.

Table 10. Natural rubbe r imports in centrally planned economics; also as a pe r centage of world national r ubber cons umption (in thousand l ong t ons )

Eastern Europe Percentage of world Year (inc 1. USSR) China Total natural ru bber consumpti on

1954 50 62 112 6 1955 91 48 139 7 1956 198 76 274 15 1957 227 57 284 15 1958 354 97 451 22 1959 331 109 440 21

1960 317 120 437 21 1961 485 83 568 27 1962 433 107 540 25 1963 421 108 529 24 1964 292 142 434 20 1965 520 22 1966 600 24

Source : 1954-1964 UNCTAD , The International Organization of Commodity Trade Case Study of Natural Rubber, TD/B/AC. 2/4, 4 January, 1966, p . 17 . 1965-1966 R. M.R. Carey, "19 65 --A Yea r of Con tinued Growth for Na tural Rubber," Rubber Development, 19 , 1966, p. 50.

36

been an important fac t or in causing economic ins tability in these pro-

ducing countr ies . More specifically, a minor c hange in gene ral economic

act i vities of the developed nations has sharply affected price levels

of rubber, and also has often reacted directly on the quantities of

rubber exported. Variations in price and the quantity of rubbe r exported

have f r equently moved in the same direc tion, which indicated that

demand factors have played an important r ole in the interantional rubber

market (see Table 11).

Table 11 . Production, co nsumption, and price of natural rubber in se lec t ed years , 1900-1966

Production Consumption Price Ye ar {in thousand l ong tons2 {in thou sand long tons2 {in c e nt 2er

1900 44 . 1 52.6 99.5 1905 62.1 70.2 126.5 1910 93.0 99 .4 206 . 6 1915 166.6 155 . 6 65 . 7 1920 353.6 294 . 3 35.9

1925 524.9 553.6 73 . 0 1930 826.1 708.9 10 .24 1935 872 . 6 939.0 12.32 1940 1,372 . 5 1,11 0 .0 20 . 10 1945 147 . 5 262 . 5 22.50

1946 750.0 1,722.5 22 . 50 1948 1,452 . 5 1,470.0 21.9 1950 1 '777 . 5 1, 722 . 5 41.3 1952 1 ,682 . 5 1, 470 . 0 38 . 6 1954 1,810 . 0 1,780 . 0 23 . 4

1956 1,893.0 1,878.0 34.5 1958 1,943.0 2,013.0 28 . 2 1960 1,990 . 0 2,065 . 0 38.5 1962 2,130.0 2,220 .0 28 . 5 1964 2,240 . 0 2,260 . 0 25 . 2

1966 2 408.0 2 470.0 23.6

Source: Derived from Appendix, Tables 35, 36, 38, 39, and 41 .

lbs.)

37

However, the heavy de pendenc e on the demand for natural rubber in

developed countries has no t been the only cause of instabilit y in these

rubber producing nations. This vu lnerable position has been accentuated

by the l ow e lasticity and f lexibility of natural rubber supply . The

students of the rubber industry are generally agreed that short-run

suppl y of the natural rubber industry is price inelastic:

While production is responsive t o price~, the ex tent to wh ich it c an be increased at any one time is limited by the number of tree s which can be tap­ped. It must be remembered that it takes seven years from the time of planting for a rubber tree to come into tapping . . .. Supply does not therefore, due to it r e lative short -term inelasticity , fully or rapidl y adjust itself to major changes in demand and in consequence this is a maj or cause of price in ­stabili t y . 4

P. T. Bauer adds:

The vulnerable position of the industry was accentuated by the low elasticity of 8Upply of important group s of produce rs.S

When rubber demand has declined in the past, the majority of estat e

producers have maintained output at a fairly constant level until the

price of rubber declined be low direct costs. These direct costs are

es t ima ted at approximately one-third to two-fifths of t otal costs.

But many small holders have virtually no direct costs and they can be

expected not on l y to maintain their c urren t production, but they may

e ven increase output in order to compensate for l os t income due to the

4p. E. Adams, Memorandum on the Fluctuations in the Price of Natural Rubber (Kuala Lumper, Malaysia: Governmen t Printer, 1958), pp. 2-3.

5P. T. Bauer, The Rubber Industry: A Study in Competiti on and Monopoly (Cambridge: Harvard University Press, 1948), p. 28.

price declines. 6 Owing to the characteristic of the demand for and

supply of natural rubber, prices have exh ibited abrupt and violent

fluctuations . 7

Consumption by Regions

The world consumption of new rubber, including both natural and

syn thetic, has been continuously rising, despite the years of sharp

38

depression and political and economic uncertainties . Table 12 presents

the average regional share of the world's total consumption of new

rubber in each decade since the turn of this century for the United

States and Western Europe. The information in Tables · 2 , 35 and 36 are

considered together . It can be seen that the average consumption

figures in each decade shown in Table 12 for the United States, Wes tern

Europe, and the world as a whole, have been higher than the peak con-

sump tion in any year during the preceding decade. Tables 35 and 36

not on l y indicate the rapid growth in the consumption of new rubber

which has taken place in this century, but also clearly present the

importance of the United States and Western Europe as a rubber consumer.

In the present decade the United States' share of rubber consumption

has decreased. However, it is still the major rubber consuming country.

Table 13 shows the average consumption of natural rubber by regional

share of the world consumption, for the United States and Western Europe.

6you, Man He, "A Study of the Natural Rubber Industry with Special Emphasis on Its Future Prospects;" (Unpublished Ph.D . Disser tation, Eugene, Oregon: Univer sity of Oregon, 1963), p. 7.

7wharton, Clifton R. "Rubber Supply Condition: Some Policy Im­plication," in T. H. Sil cock and E. K. Fisk (eds.), The Political Economy of Independence Malaya: A Case Study in Development (Berkeley and Los Angeles, California: University of California Press, 1963), pp . 133-134.

39

Table 12. Average consumption and regional share of new rubber consump ­tion since 1900 (in thou sand long tons)

U.S.A. Western EuroEe World Pe riod Average Percentage Ave rage Percentage t ota l

1901-1910 29 41 31 47 70

1911- 1920 117 63 53 29 185

1921-193 0 354 64 131 24 548

1931-1940 485 52 941

1941- 1950 865 59 328 22 1,464

1915- 1960 1,403 47 801 25 2,962

1961- 1966 1,866 39 1,362 28 4,844

Source: Calcu lat ed by using Table 35 for 1900- 1937 and thereafter, Rubber Statistical Bulletins several issues .

Table 13. Average consumption and r egional s hare of natura l rubber consumpt i on since 1.900 (in thousand l ong t ons)

U. S. A. Western Euro2e World Period Average Perc entage Average Percentage total

1901- 1910 29 41 33 47 70

1911- 1920 11 7 63 53 29 185

1921-1930 354 64 131 24 548

1931- 1940 485 52 941

1941-1950 448 47 254 27 952

1951- 1960 531 29 642 35 1 , 825

1961-1966 483 21.1 661 29 2,278

Source: Calcula ted by using Table 35 for 1900- 1937 and therea f ter, Rubber Statistical Bulletin several issues .

40

There has been a gr owth in the cons umpt ion of natural rubber in each

decade in bo th the United States and Wes t ern Europe. Ye t, alth ough

average cons umption increased, it did no t e x pand enough t o s ur pas s the

peak of the preceeding decade. Th is i s an inte r e sting contras t t o the

case of new rubber which was examined in Table 12.

In th e period 1951-1960 and 1961-1966, the United State s and Wes t ern

Eur ope t oge ther consumed 64 and 50 per cent of the world's t o tal consump-

tion of natural r ubbe r re spective l y . This drastic decline f r om the

appr oximate 90 perc ent ave rage in the fi r s t three decade s was pr i maril y

due t o the large change in the us e of s ynthe tic rubber, parti cu l arly

i n the United States . Be f or e the s ynthe tic industry was successfull y

de ve loped, the United States alone absorbed 63 percent and 64 pe rcent

of the t o tal world consumption in the decade s 1911-1920 and 1921-1930

res pec tive l y . The e ff ec ts of th~ inc rea se use of >ynthe tic rubber

for wide l y diversified pr oduc t s in the decade 1951-1960 and 1961-1966 ,

on the Uni t ed States' de pendence on na tural rubber were great.8 The

share of the United States in the t otal world consumption of natura l

rubbe r wa s diminished t o 21 pe r cent in the period 1961- 1966, the all-

time l ow. In the present decade , the annual consumpti on of natural

rubbe r in the United States was approximate ly 500,000 t ons l ess than

that of We stern Europe .

Clearl y , less reliance on f or e ign sources f or natural rubbe r by

the United States is a result o f the succe ssful devel opment of synthetic

8UNCTAD, Report of the International Rubber, Study Group Working

Part y on the Prospects for Natural Rubber, TD/B / C. 1/ 20, 28 June , 1966, Appendix 1, pp. 1-7 .

41

rubber. For example, in 1966 the United States met its consumption

requirement for new rubber by using 549,700 tons of natural rubber,

equivalent to 24.7 percent, and 1,672,000 tons of synthetic rubber (see

Table 36).

In contrast with the United States, the share of Western Europe

in the consumption of natural rubber has been increasing, as shown in

Table 13 . However, the moderate increase is not enough to offset the

sharp decline in consumption of natural rubber by the United States.

Relatively heavy Western Europe dependence on foreign sources of natural

rubber can be seen in the consumption pattern shown in Table 36. In

1966, 50 percent of the total new rubber consump tion was supplied by

natural rubber.

The drastic decline in the consumption of natural rubber in the

United States has resulted in attempt s by the rubber producing countries

to increase their sales elsewhere and various methods such as more

efficient production to lower cos t s , increase in its quality and uni­

formity, make available new forms of rubber, and t o expand its uses. 9

In this connection, a brief mention is made below with respect

to consumption of natural rubber in the centrally planned countries;

the Soviet Union, Ea s t e rn Europe, and Communist China.

Table 14 s hows es tima t ed natural rub ber impor ts and estima t ed

synthetic rubbe r domestic production in Soviet Union and Eastern Europe .

The sudden low percentage use of natural rubber in U.S.S.R . and Eastern

Europe in 1964 is probably due to U. S.S . R. drawing down inventories during

9stephen T. Semegen, "Natural Rubber: Progress at the Mid -Decade, "

Rubber World, 154(1966), p. 75.

42

Table 14. Estimated imports of natural rubber and domestic production of Soviet Union and Eastern Europe (in thousand long tons)

Total Percentage Year N.R. im2orts S. R. eroduction consumEtion of N.R .

1961 485 478 963 50

1962 433 604 1,037 42

1963 421 754 1' 17 5 36

1964 292 933 1,225 24

Source: UNCTAD, The International Organization of Commodity Trade Case Study of Natural Rubber, TD/B/AC . 2/4, 4 January, 1966, p. 18.

that year. 10 Imports to the U.S.S.R. in 1965- 1966 has t o have been

resumed at a higher level than that of the preceding year (see Table

10) .

The figures in Table 10 and 14 show that the centrally planned

countri es have shown a steady growth in the consumption of both natural

and synthetic rubber in the last decade. In 1964 , t he centrally planned

countries consumed abou t 434 , 000 tons of natural rubber . This is equi -

valent to 35 percent of their requirements. In addition, they consumed

933,000 tons of synthetic rubber.

At present of the natural rubber consuming countries Japan ranks

second , exceeded on l y by t he United States. Table 15 shows the fast and

steady growth in consumption of both natural and synthetic rubber. No te

that the share of natural rubber declined from 73 percent in 1960 to

54 percent in 1965. In 1965 Japan consumed about 365,000 tons of

natural and synthetic rubber . This was 7 percent of world rubber

lOUNCTAD-TD/B/AC . 2/4, ~., p. 18 .

43

Table 15. Consumption of natural and synthetic rubber in Japan (in thousand long tons)

Year N. R. S.R. Total Percentage of N. R.

1960 165.7 61.3 227 73.0

1961 176.0 84 . 0 260 68.0

1962 190.0 104.0 294 64 . 5

1963 192.4 125 . 6 318 60.5

1964 202.8 159.2 362 56.0

1965 198.3 166.7 365 54.3

Source: UNCTD, Report of the International Rubber Stud y Group Working Party on the Prospects for Natural Rubber, TD/B/C. 1/20, 28 June, 1966, p . 17-18.

consumption . (see Table 15 combined with Table 36).

Consumption by Uses

Crude rubber is a remarkably versatile raw ma t er ial and therefore

finds application in the fabrica tion of a wide variety of goods. K. E .

Knorr has classified the use of rubber by its special properties as:

In many articles--tubes, hose , boots, waterproof clothing, bathing utensils, contraceptives-- rubber is used because of its impermeability to liquids and gases and its singular plasticity. In the electrical field, rubber is applied primarily because of its remarkable resistanc e to electrical currents. Its elast icity is utilized in the field of mechanical rubber goods. In combination with o the r qualities, rubber's abrasion­resistance allows the making of satisfactory tires, soles, and conveyor belts . The fabrication of rubber­containing sanitary goods utilizes the ease with which the material can be c leaned with water and antisep tics. Imperviousness t o many chemicals makes rubber indispensable

44

in the modern laboratory. 11

Concerning the importance of rubber, P. W. Barker, a rubber s pecial -

ist with the U. S. Department of Commerce has point ed out that:

Rubber is the one of the mos t useful substances in the world t oday. Remove it entire ly from our live s and civil ization would be plunged into another Dark Age ; gone wou ld be the modern system of communication and transportation . . . whole branches of the arts

and a bewildered world we would inhabit.l2

World consumption of rubbe r takes many forms. Countries not only

differ in the amount, but al so in th e natur e of the goods they produce.

The extreme l y rapid development of the pneumatic tire, which account ed

for more than 70 percent of total consumption around 1940, made its

mark almost everywhere , and, as a r es ult, production methods became

relatively standardized. 13 J ean Le Bras has classified the major types

of goods with reference t o the four l oca lizations of the industry .l4

First, there i s the heavy finished products industr y, corr esponding

to application in cars, bicycles and aircraft. It manufactures pne umatic

tires, inner tubes, solid tires, e tc., using mass - production methods

in extensive factories. It has been es tablished where a large labor

fo rce is readily available.

11K. E. Knorr, Wor ld Rubber and Its Regulation (California : Stanford University Press, 1945), pp. 44-45.

12P. W. Barker, Rubber Industry of the United States 1839~1939 Trade Promotion Series, No. 197 (Washington, D. C. Department of Commerce, 1939), p . 30.

13Le Bras, op. cit., p. 93.

14 Ibid . , pp. 93-9 6 .

45

The second group consists of the footwear industry, including the

manufacture of soles and heels, and the clothing industry. These are

frequently associated with the textile industry.

The third group includes the ancillary industries, covering the

production of all rubber articles li kely to be used in engineering or

for machine tools, such as hose, belting, conveyor belts, brake lining,

coating for metals, and also the cables and insula ting material for

elec trical equipment. Their location usually tends to reflect the

influence of concen tration of the engineering or electrical manufactur­

ing industries .

In addition, there are many other types of goods --medical , surgical,

and dental goods , f urni shing materials, sports goods, glues and adhe­

sives, printing accessories, and ebonite goods. Factors which determine

where it shall be produced are the location of the consumer, and very

frequently the availability of skilled labor of the different types

required for the heavy section of the industry.

Table 16 shows that in the United States, until 1941, 100 percent

of new rubber required in the production of transportation goods was

provided by natural rubber. However, abundant supplies of synthetic

rubber caused abrupt changes in the relative distribution of natural

and s~1thetic rubbe r in transportation products, as well as in non

transportation goods .

The use of natural rubber in transportation, almost entirely in

tires and tubes for automobile, farm tractors, trucks, buses, airplanes,

and bicycles , declined from 100 percent in 1941 to 14.7 percent in 1945 . 15

l5"The Rubber Wo rld Outlook for '67," Rubber World, 155, (January,

Table 16. Consumption of rubber in transportation and non-transportat ion and perce ntage of natural rubber to the total consumption (in thousand long t ons)

U.S.A. U.K. Franc e Year Trans2. % Non-transE:· % Trans E. % Non- transE. % TransE:· % Non -transE: ·. %

1935 378.5 100 113.2 99 . 8 1937 424.0 100 120.1 99.6 1939 442 . 7 100 151.1 98 . 7

1941 525.0 100 256.3 97.5 1943 348.8 66 . 5 139 . 7 61.5 1945 590.2 14.7 208.8 8.9 1947 830 . 6 53.3 291.6 41.1 1949 659.5 58.0 329 . 4 58 . 3 64.6 95.0 39.9 85.1

1950 818.2 58.4 440 . 3 55.1 128.7 100 93 . 8 97 . 0 65.4 95. 4 41.9 89.3 1951 812 . 0 38.1 401.0 36.1 135.8 100 102.3 96 . 3 1952 842.0 35.9 419.0 36 . 0 108.1 99 . 8 94.1 94.8 1953 858 . 0 41.7 480 .0 40.7 115.9 99. 6 95.6 95.3 1954 777.0 49.6 456 . 0 46.1 133.6 97.9 119.4 95.0

1955 960 . 0 42 . 7 570.0 39.5 147.9 92.5 120.7 92.5 1956 897 . 0 40.6 539.0 36.7 126.2 78 .4 113 . 6 89.9 1957 926.0 37 . 0 538 . 0 36 . 4 128 . 0 66 . 5 116.5 87.3 1958 861.0 35.1 496.0 36.9 126.6 63.0 119.3 86 .0 1959 1,024.0 34.7 603.0 33.8 142.3 59.1 120 . 0 83.3 115.5 66.5 84 . 2 67 . 3

1960 995 . 0 32.5 563.0 27 . 5 155.6 53.3 135.4 71.5 124 . 1 60.8 94.1 55.3

Source : Calculated from data in Man He You, ''A Study of the Natural Rubber Industr y with Spec ial Emphasis on Its Future Prospects 11 (Unpublished Ph.D. Dissertation, 'Eugene , Oregon: University o f Or egon, 1963), pp. 192- 197.

,_ "'

47

This was caused by the United Stat es being cu t off from Southeast Asia

rubber sources during World War II . Renewed supply of natural rubber

from Sout heast Asia after 1945 increased the proportion of natural rubber

absorbed in transportation products to 58 percent in 1950. This rise did

not last l ong . After the Korean Conflict, the sufficient supply of

syn thet i c rubber offe r ed various advantages in both prices and quality

as compar ed to natural rubber (see the detai l in Chapter V). The consump­

tion of natural rubber in transportation declined t o the low level of

32 percent in 1960 . The most r ecent report from the General Tire Company

reveals that synthet i c rubber in America's transportation cont i nued its

gr owth in usage as i t r eached approximately 76 percent of t otal 1966

volume of raw mate rial . 16

As in the Unit ed States, the predominant position he ld by natural

rubber in transporation products has been serious l y a ffec t ed by the

recent emergence of syn thet ic rubber industries in both the Unit ed

Kingdom and France. Table 16 shows that the percentage use of natural

rubber declined f r om 100 percent in 1951 t o 53 percent i n 1960 in the

United Kingdom. In the case of France, the percentage dec lined f r om

95 percent in 1950 t o 61 percent in 1960 .

A similar trend in the dec l ine of the percentage use of natural

rubber in transpor tation goods is also apparent in non-transportati on

goods . In the United States, the proport i on of natural rubber used in

non-transportation products has been not only continuousl y fal ling,

but is also lower than the proportion of natural rubber used i n

16Ibid., p. 51

48

transportation goods. For exampl e: in 1960, 28 percent of total new

rubber consumption for non-transportation goods was supplied by natural

ru bbe r, while 32 percent was natural rubb e r in transportation products.

In the United Kingdom no sharp c hange in the distribution of new

rubber consumption in non-transportation produc ts ha s occurred in the

pas t decade . However, quite a change is ev ident in case of France.

Production

Plantation rubber production is ver y we ll developed in Southeas t

Asia because of well-distributed rainfall, t emperatur es between seventy

and nine t y degrees Fahrenheit, and abundant cheap labor .17

In addition

t o these fac t ors, four others are cited by Sir Andrew Me Fadyean in

explaining the development of rubber plantations in this area: (l) All

of the early experimental work on rubber planting was carried out he r e;

(2) the countries in which the plantation industry was begun had stable

governments with good a dministrators s ince they were either British

or Dutch colonies; (3) there was ample land suitable for planting; and

(4) ther e was no great trans portational difficulties, all the territories

having easy access to the sea from coast lines l ong in proportion to the

areas behind them. 18

As Table 2 ind i cates, in 1910 almost all of the world production

of raw rubber, 93,000 t ons, came f rom wild rubber trees . The plantation

rubber-growing industry, at this early stage of its devel opment, produced

17Phillips, ~. , p. 147 .

18Andrew Me Fadyean, The History of Rubber Regulation 1934-1943 (London: George Allen & Unwin, Ltd., 1944), p. 10 .

49

only 11,000 tons, or abou t 12 percent of the year' s supply . 19 By 1966

the wor ld produc ti on of raw rubber increased t o about 5,726,000 t ons,

of which 2,408,000 long t ons was natural rubber f r om plantation and

about 3,318,000 l ong t ons was synthetic.

Since 1914 plantation rubbe r ha s maintained its l eader ship over

wi ld rubber , contribu ting about 99 per cent of the t otal natural rubber

output of the world in 1966. In this case, plantation rubber was developed

not only to i ncrease the supp l y of rubber, but also for technological

advantages . Wild rubber was non-un iform and dirty , and cou ld not meet

the basic technological requi r emen t s for all kinds of expansion of the

rubber industry during the early 1900's . 20 Another reason for the rapid

development of plantati on of rubber i s the greater regularity of supply

and l ower price . As Lennox A. Mills wrote:

By 1914 the ou t put of estate rubber exceeded that of j ungle rubber, since systematized produc tion with settled labor condi t ions proved the more economical and reliable . Ma layan estates could deliver rubber i n New York for less than its cost to collec t and s hip wi ld rubber fro m the Amazon. Moreove r they could assure a r egular su~rl y while the collector s of wild rubber could not.

The r ise i n demand for r ubber due to improved t echnology and new

uses r esulted i n greater effor ts t o improve and deve l op new sources of

rubber supply ( see Chap t er II). In 1962, 10.5 million acres we r e plant ed

19G. S. Whitby and othe rs (eds.), Synthetic Rubbe r (New York :

John Wiley & Sons, Inc., 1954), p. 1.

20s . M. Caldwell, "Scientific Contributions to the Rubber Industry," Rubber World, 145, (April, 195 7), p . 58.

211 . A. Mills , Malaya: A Political and Economic Apprai sa l (Minneapolis,

Minnesota: Univers ity of Minnesota Press, 1958), p. 22.

50

with natural rubber trees. 22 On a world wide basis rubber is exported

by Malaya, Indonesia, Thailand, Ceylon, and many other Asian countries,

as we ll as some countries in Africa and Latin America. The States of

Malaya, Indonesia, Thailand, and Ceylon together have provid ed about 80

percent of the wor ld' s rubber production since 1948.

Table 17 indicates the ranking of the more important rubber producing

countries in Asia. Table 18 shows the relative importance of es tates and

small holdings in various countries.

Thr oughout the first quarter of the cen tury, the bulk of all rubber

produced was supplied by the estates. 23 Gradually , however, the samll

holders have strengthened their position. Today, small holdings supply

nearly two-trhids of the total output in Indonesia, more than two - f ifths

in Malaya, and almost the en ti re output of rubber in Thailand . 24 Although

the distinction between estate producers and native small holders is

arbitrary, a distinction between the two types of production is useful

for economic analysis of flexibility of supplies, discussed in Chapter V.

Mrs . M. J . ' tHooft Welvaars' case study fo r UNCTAD presented the signifi -

cant difference between estates and small holdings as follows:

Perhaps it may be said that those countries producing natural rubber largely on estate are better f itt ed in the rac e for higher productivity than the countries pr oducing mainly on smallholdings, unless the latter 's gove rnment s are very active of applying r esearch and possess -- or provided with--the financial means to carry their sma llholders over

22Po l hamus, ~. , pp. 31-3 2 .

23Percy W. Bidwell, Raw Material: A Study of American Po l icy (New York: Harper & Br others, 1958), p. 264.

24Phillips, ~ .• pp. 147-148.

Table 17 . Production of natural rubber in the principle producing countries (in thousand long tons)

Latin Year Ma laya Indonesia Thailand Ceylon Vietnam Rest of Asia Africa America World Total

1956 626.0 686.7 134.6 95:4 69 . 1 138.0 113.5 29.7 1,893

1957 637.5 684.5 134.0 98 . 2 68.6 135.9 116.3 30.0 1,905

1958 662 . 9 685 . 2 138.4 100 . 2 70.5 136.2 123 . 3 26 . 3 1,943

1959 697 . 8 693.5 171.3 91.7 74.2 144 . 6 141.8 28.1 2,043

1960 708.4 610 . 5 168.2 97.3 75.4 154 . 2 147 . 0 29.0 1,990

1961 736.7 671.4 183 . 2 96.0 77.9 158.4 142.0 29.4 2,095

1962 751.6 670.8 192.3 102.4 74.0 159 . 8 150.8 28.3 2,130

1963 788.5 573.1 186.8 103.1 70 .7 166.8 151.8 27.2 2,068

1964 825.3 638.4 218 . 2 109.8 73.3 181.3 158.8 34.9 2,240

1965 860 . 7 705.7 213 . l 116.4 60 . 0 182.8 153.5 35.8 2 . 328

1966 928.5 700 . 0 210 . 0 128 . 9 50.7 187 . 4 170.0 32 . 5 2 408

Source: Commodity Yearbook 1967, p. 282.

52

Table 18. Structure of natural rubber industry, percentage acreage of srnal lholdings

Srnallholdings Country Esta t es (l ess than 100 acres)

States of Malaya and Singapore 47% 53%

Sarawak 3 97

Sabak 37 63

Brunei 11 89

Indonesia 28 72

Ceylon 47 53

Thailand 10 90

Vie tnam 71 29

Cambodia 90 10

India 32 68

Burma 53 47

Total Asia and Oceania 36 64

Brazil 42 58

Congo 73 27

Liberia 50 50

Nigeria 12 88

Cameroon 98 2

Total Africa 47 53

Total World 37 63

Source: UNCTAD, TD/B/AC . 2/4, op. cit., p. 29.

53

a replanting period . 25

Production of Synthetic Rub ber

At the e nd of World War II, only four countries had any substantial

synth et ic rubbe r production capacity--Canada, Ge rmany, Ru ss ia, and the

United States . The competition between natural and synthetic rubber did

not become serious until 1940 when the United States embarked on a syn the -

tic rubber program to counter the threat of being cu t off from the rubber

source in Asia. The Japanese conquest of nearly all the producing areas

in Asia resul t ed in a rapid acceleration of the synthetic rubber program .

American advance technology and mass produc tion techniques fostered

the infant synthetic rubber industry t o a high level of produc tion in

l ess than five years .26

After 1945, the f uture of synthetic rubber

remained uncertain . Few countri es other than the United States showed

interest in building the new industry. In the past few years, however,

capacity ou t s ide the United States had rapidly expanded .

Table 19 s howed the production of syn thetic rubbe r in various

countr i es from 1940-1966. The bulk of synthe tic rubber at present

produced is accounted fo r by SBR, which is well ahead, followed by butyle ,

neo prene , s t ereo- rubbers (pol yi sopr ene and polybu tadiene) and nitrile . 27

At the same time, we find that produc tion is on the i ncrease in many

25UNCTAD-TD/B/AC. 2/4, ~-, p. 30.

26A completed s tud y of U. S. synteh t ic rubber indus try during the World War II, see Frank A. Howard, Buna Rubber: the Birth of an Industry (New York: D. Van Nostrand Company, Inc., 1947).

27Phillips, ~ . • pp. 68 - 82 .

Table 19. World production of synthetic rubber 1940-1966 (in thousand long t ons)

World Year u.s .A. Canada Germany U.K. Italy Ja2an France To tal

1940 2. 6 39.8 42.4 1942 22.4 98 . 1 77 . 5 1944 764.1 34.8 101.6 120.2 1946 740 . 0 51.0 15.6 350.0 1948 488 . 3 40 . 5 3 . 4 900.5

1950 476.1 58 .4 534.6 1952 798.5 74 . 3 4 . 9 877.8 1953 848 .4 80 . 9 6. 3 935.6 1954 622.9 86 . 6 7.0 716.4 1955 970 . 5 103 . 9 10 . 9 1,085.3

1956 1,086.0 120 . 7 10.7 1,211.0 1957 1,118 . 0 132 . 1 11.6 0 . 8 1,263.0 1958 1, 055.0 135 . 0 22 . 7 11.3 20 . 0 1,243 .0 1959 1,380 . 0 100.7 48 . 1 57 . 0 47 . 0 1.2 5.9 1,633.0 1960 1,436.0 159.7 79 . 8 90.0 70 . 0 18.8 17.2 1,880.0

1961 1,404.0 164.5 85.6 106.0 82.0 50 . 0 40 . 0 1,975.0 1962 1,574 . 0 168 . 3 88 . 2 117 . 0 86 . 0 68 . 0 63 . 0 2,240.0 1963 1,608 . 0 178 . 7 106 . 5 125 . 0 94 . 0 90 . 0 97.0 2,438.0 1964 1,765.0 197 . 5 135.7 153 . 0 110 . 0 120 . 0 128 . 0 2, 803.0 1965 1,814 . 0 203.0 161.4 171.7 118 . 0 158.8 146 . 0 3,015.0

1966 1 969 . 0 200.0 170 . 9 3 318.0

Sour ce: Rubber Statistical Bulletins, s everal issues .

'-" t-

55

countries . Germany, Russia, Canada, and the United States are the

pioneer countries. The new countries, who made a determined entry into

their branch of the synthetics industry, have recentl y been joined

by Great Britain, Italy, Holland, France, Japan, Australia, and Brazil.

In addition, projects have been announced in several other countries,

namely, Poland, India, Israel, Mexico, Argentina, South Africa, Belgium,

Rumania, and Red China. 28

28Le Bras, ~-, p. 70.

CHAPTER IV

THE NATURAL RUBBER INDUSTRY IN THAILAND

Structure of the Economy

A country with an area of approximately 200,000 square miles,

entirely under the tropical monsoon climate, and a population of about

32 million people, Thailand is relatively small and underdeveloped. 1

Known resources are limited to agriculture and rubber-planting areas,

tin deposits, and some high-value teak forests . Basic mineral and power

resources, as far as they are known, are particularly poor . 2 Relatively

be tter endowed with hydro e l ectric power potentials, the first hydro­

power dam, part of the Yanhee Multi-Purpose Project, 3 was completed

in 1964. In terms of absolute number, the population of 32 million,

increasing at a rate about three percent per annum, is sizable. Per

capita income, however, was only about $125 dollars in 1965 (see

Table 20).

1 Office of t he Prime Minister, Thailand Official Yea rbook 1964

(Bangkok: Government Hou se Printing Office, 1965), pp. 1-10, 327 -374.

2united Nations, Economic Survey fo r Asia and the Far East , 1947-ll..2.,L (Bangkok) .

3The first project to undertake storage and regulation of river waters in Thailand on a large scale includes a 150 meter high dam and a reservoir of over 5 billion cubic meter capacity. Beside providing 560,000 kilowatts of electric power, it will benefit irrigation and flood control in the Central Plain.

Table 20. Gross national product of Thailand (in thousand dollars)a

Product

Agriculture, total Agricultural corps Livestock Fisherie s For estry

Mining and quarrying Manufacturing Construction Electricity and water supply Transportation and communication Wholesales and retail trade Banking, insurance, and real es tate Ownership .of dwell ing s Public administration and defense Service

GNP. at market price

Population (in million) Per capita GNP. at market price

- dollars

1951

14,139.1 10,873 . 3

1,208.4 615 .4

1,439.0 537 . 4

2,900.6 810.4

31.2 883 . 4

5,084.6 100.4

1,048.9 783.7

1 890.2

28,209.9

20.3

62.4

%

50 . 1 38.5 4.3 2.2 5.1 1.9

10.3 2.9 0.1 3 .1

18.0 0 . 4 3.7 2.8 6.7

100.0

1955

828,405 598.760 105,610 41,440 82,595 30,77 5

232,370 79,300 4,210

100,700 386,865

27,370 59,555 93,985

128 850

1,972,385

%

42.0 30 . 4

5 .3 2.1 4.2 1.6

11 . 8 14 . 0 0.2 5.1

19.6 1.4 3 . 0 4 . 8 6.5

100.0

1960

1,084,440 749,270 195,990 48,930 90,250 38,265

294,100 100,515

11,355 197,425 483,010

63,780 127,845 135,330 254 730

2 ,790, 795

Per Capita Income

22.9 27.1

76.4 102.8

'7.

38.9 26.9

7 .o 1.8 3.2 1.4

10.5 3.6 0.4 7.1

17.3 2.3 4 .6 4.8 9.1

100.0

1965

1,314.690 866,070 207,635 111,840 109,145 83,800

484,215 191,955

28,845 299,865 746,435 146,730 169,700 196,100 346 925

4,009,260

32.0

125 . 2

Source: Calculated from Office o f the National Economic Deve lopment Board (hereafter r eferred to as ONEDB), National Income of Thailand .(Bangkok , Thailand : Several issues).

aConversion at exchange rate for convenience and hereafter, $ 1 = 20 baht.

'7.

32.8 22.1 5.2 2.8 2.7 2.1

12.1 4.8 0.7 7 . 5

18.6 3 .7 4.2 4.9 8.6

100.0

58

Agriculture and other primar y producing activities dominate the

entire economy . The pr oportion of the occupied population engaged in

agriculture was 82 percent in the census year of 1961. 4 About 33 percent

of the G. N. P. in 1965 was directly attributed t o agriculture, forestry,

and fishing. No doubt the contribution of agriculture t o the national

income would be much greater if related activities --the processing,

transport, commerce, finance, of agricultural products --were included.

The postwar growth of the economy has resulted in significant

structural changes. The most outstanding feature of the changing produc­

tion pattern has been the marked decline in the relative importance of

the dominant agricultural sector . From 50 percent of the G.N . P. in 1951

the share of agricul t ur e fell t o 33 percent in 1965 . At the same time

the combined contribution to the G. N. P. of manufacturing , construction,

transportation and communication, and public utilities rose sharply f r om

16 percent of the G.N.P , in 1951 t o 22 percent in 1960 and 25 percent in

1965.

The trend towards diversification of the Thai economy is reflected

not only in the different growth rates between the dominant agricultural

sector and the industrial and service sectors, but in a widening variety

of production within the agricultural sector itself. As may be seen in

Table 21 the combined value of the "other crops " which include corn, sugar

cane, cassava, kenaf, coconut, tobacco, cotton, and live s tock has risen

cons iderabl y faster than rice in the postwar period .

4 Office of the Prime Minister,~., p. 330 .

59

Table 21. Percentage shares of the value of major types of agricultural production in Thailand

1938- 39 1948-50 1953-55 1958 1961 1963 1965

Rice 62 .6 55.5 42.1 40.0 39.8 46.2 43 . 4

Rubber 8.9 8 . 8 11.4 8.8 9.1 8.0 7 . 6

Other Crops 28.5 35.7 46.5 51.2 51.1 43 .2 46 .2

Total 100.0 100.0 100 . 0 100 . 0 100.0 100.0 100.0

Source: For 1938-1950: J. S . Gould, Preliminary Estimates of the Gross Geographical Product and Domestic Income of Thailand (Bangkok: National Economic Council, 1953), pp. 11 - 12. For 1953-1965: ONEDB, National Income of Thailand (Bangkok: several issues)

The share of the "other crops" in recent years has amounted to about

half of the total value of all agricultural production whereas the share

of rice s ince the ear l y 1950's has dec lined from about one half to just

more than one-third . But the rubber hes gene rally constituted an annual

share in agricultural sector of about eight to nine percent yearly.

Development of Rubber Plantations

Rubber (Hevea Brasiliensis), according to the records available,

was introduced into Thailand from Malaya on two occa sions . The first

one was taken to Trang (southern region) around 1900-1901 by the late

Phya Rasda-nu Pradit, then the Governor of Trang. The second was

conveyed some ten years later by Luang Rajmaitree, a prominent resident

of Chantaburee (eastern region).s From these two importations rubber

Span Maleewan ," Future of Rubber Plantation Owners in Thailand," Agriculture XXXII(l959), pp . 281-283. Ceylon began planting in 1889, Malaya in 1895, and Indonesia in 1896. Virginia Thompson, Thailand: The New Siam (New York: the Macmillan Company, 1941), p. 479); Dijkman, ~.,p.6.

60

plantations began their first exports in 1911 when 100 tons were shipped

out. At the same time Mala ya exported 10,000 tons; Indonesia 2,300 tons;

Ceylon 3,200 tons; and Indo-China 2,000 tons. Sinc e then rubber planta-

tions in Thailand increased consistently and in 1950 Thailand was able

to expor t as much as 112,200 long tons, thus ranking fourth among the

producer countries.

In 1955 Thailand's rubber export increased to 130,200 long tons,

and was exceded onl y by Malaya and Indonesia. · Thailand's 1955 planting

acreage was r ecorded to be above 912,400 acres, against 419,200 acres

in 1940 . In 1964 the planting area had increased t o about 1,400,000

acres, of which 1,108,800 acres were tappable and the production was

about 218,200,000 tons (see Table 22). Domes tic consumption, however,

was very l ow . The most recent consumption (1964) was estimated to be

about 2 ,000 t ons a year . 6

The rubber planted areas are in the fourteen provinces of the

Southern region and four provinces of the Eastern region. But the

principle planted areas, amounting to more than 90 percent of the

total rubber planted areas are in the Southern region . The four

provinces, planting over 100,000 acres each, are Narathiwat, Songkhla,

Yala and Pattan. These are deep south provinces bordering with Malaya

and Trang. The center of the planting region has been along the branch

railroad between Thungsong, Kantang, and Hadyai, where the town of Trang

and Had yai are the rubber centers. Acceptable climatic conditions,

6soonchu Disayavanich, The Development of Rubber Plantation in

Thailand (Unpublished M:A. Thesis , Thamasat University, 1964), p. 117.

61

Table 22. Rubber plantation areas in Thailand (in thousand acres)

Production Year (in long tons)

1920 400

1929 4,300

1934 17,700

1940

1950 112,200

1955 130,200

1960 168,200

1962 192,300

1964 218,200

1966 210,000

Source: For 1920-1950, James C. Ingram , Economic Change in Thailand Since 1850. (Stanford, California: Stanford University Fress, 1955), p. 102. For 1955-1966, ONEDB, Annual Report on Economic Condi t ion of Thailand, several issues.

8 Rai is an area measure in Thailand, equal to 1 ,600 square meters or about 0.4 acre (hereafter referred to this rate to convert rai to acres).

unused land, and easy railway access favored this development in the

southern penins ula. Smaller acreages are found along the l ower s l opes of

rainy hills in Chanthaburi, Rayong, and Trat on the southeas t coast of 7

the mainland .

7Department of Agriculture, Ministry of Agriculture, "Para Rubber," Bangkok , 1965, pp. 1-3. (Mimeographed)

62

Rubber-growing in Thailand followed a different pattern of development

from that in other countries of South Asia . Plantations have neve r been

large . Mos t plantings are of only a few acres each. K. P. Landon wr ot e

in the late 1930 ' s that most of the small planters had 2,000 t o 3,000

trees, and that on l y a few es ta tes have as many as 10,000 trees. 8 The

plan ting and production are controlled by Chinese and native Thai, not

by Europeans as in Ma laya. 9

Production of rubber in Thailand has responded roughly to price

changes. Production was firs t undertaken during the automobile boom

at the beginning of this century when the price of the wor ld rubbe r

market ros e to over $1.00 dur ing the period 1904-191 2 ( see Figure 1) .

The acreage was increased extremely s l owl y in this period. By 1920

only about 60,000 acres wer e planted . Af ter that yea r world rubber

prices colla psed (the rubber price at New York moved down from 36 cents

per pound in 1920 t o a s low as 3.4 cen ts per pound in 1932), and grower s

ceased t o plant trees and abandoned gardens not old enough to be tapped .

However, interest r evived for a short period from about 1921, reaching

its peak in 1925 when the British Government and Rubber Growers ' Associa-

tion in Malaya and Indonesia cont rolled production a nd expor t s in Malaya,

Indones ia, and Ceyl on. From 19 25 , prices s tarted t o fall again rapidly

r eaching the l owes t point in 1931 because of the world economic cri sis.

Because the controls - imposed were only regional in nature , the y we r e only

SK. P. Landon, Siam in Transition (Chicago, Illinois: Univer si t y of Chicago Press, 1939), pp. 70- 73. Ther e ar e average abou t 125 rubber trees per ac re .

9 Robert L . Pendleton, Thailand: Aspec ts of Landscape and Life

(New Yor k : Duell, Sloan and Pearce, 1963), p. 202.

Production in thousand l ong t ons

250 250

225

200 200

175

150 150

c: 125 " '"' ,..,

"' ... 100 100 '"' " (!)

" (!)

75 " ,.., "' --.... cr'

50 50

25

0 1910 1920 1930 1940 1950 1960 1970

Figur e l. Thailand ' s rubber production and price, 1910-1966 . Plotted f r om Tab l es "' w 38, 39 and 41.

64

e ffective until 1925 . In March 1934 Thai land j oined the International

Rubber Regulation Agreement whi ch was i n force f r om 1934-1943. 10

The high demand following World War II br ought an unprecedented

11 rubber boom in Southern Thailand. Prices rose rapidly . As a consequence

of the United States s t ockpiling and excess buying during the Korean

Crisis, s hee t rubber produc tion rose f r om 64,900 tons in 1947 t o 112 ,200

tons in 1950 . The market valu e at Bangkok of Thai r ubber in 1947 was

$156 ,750,000; in 1950, $696,150,000 ; in 1951, $1,073,800. 12 Then,

in 1953, a t the end of the Korean Crisis, prices fel l drastically from

61 cen ts a pound in 195 1 to 24 cen t s a pound. It has recovered somewhat

since, but Thai growers have been ve r y badly affected. Recen t increases

in production r ef lect the coming into tappable ma turity of trees plant ed

shortly af ter World War II . 13 Both exports and prices r ose sharply in

1959 and 1960 due t o the increase in demand of deve loped coun t ries a nd

planned countrie s. The val ue of rubber exports in this period r ose 23

1 ~cFadyean, ~. , pp. 22- 47 and Knorr,~. , pp. 90- 124. The IRRA, the first comprehensive and compulsory scheme fo r the strict control of rubber supplies t o the world marke t, was a treaty between the five signator y governments. The produCing countries covered we re Bri ti s h Malaya, Ceylon, India, Burma, North Borneo, and Sarawak; the Netherland Indies ; Thailand; and French Indo - China. Together these countri es furn i shed 89 perc ent of the world rubber ' s export s in 1934 . The agreement came into force from June 1, 1934 t o Decemb er 31, 1938 and then it was renewed extending t o 1943. However, on April 30, 1944, the agreemen t was finally terminated .

11Ingram, ~. , p. 105 .

12oivision of Agriculture Economics, Ministry of Agriculture, A Statistical Review of Thai Agriculture 1954 (Bangkok, Thailand, 1956), p . 82.

13 Pend leton, ~., p. 202.

65 14

percent, bringing a 30 percent rise in income. The year 1960 was

the firs t time that rubber export exceeded rice earned $128,950,000 ,

thus exceeding rice which was $128,500 ,000 and had always been

Thailand' s most important expor t items ( see Table 25).

Rubb er Holding

Native planters control most of the rubber acreage. Table 23 shows

that the average acreage holding was only 8 . 5 acres in 1950. Ninety-six

percent of the number of holdings in 1950 were under 19 acres, and 67

percent of the ac reage in rubber was in these small holdings. Only 8

percent of the t o tal area was in plantations of 99 acr es or over, and

these 241 ho ldings averaged only 266 acres . Large - scal e plantati on cul-

tivation is not important in Thailand.

Rubb er acreage expansi on in recent years ha s come principally f r om

small holdings und e r the Thai or Chinese . The smaller plantings are

generally owned by Thai , es pec ially those of Malay descent. Larger

plantings, including genuine plantati ons, are primarily Chinese-owned and

operated. Table 24 shows the owner ship of rubber holding s , based on

nationality.

It is es timated that roughly about hal f the t otal rubber area is

owned by pe rsons of Chinese ances try, bu t there are no officia l statistics

on this point .15

Of holdings unde r 20 acres , the Chinese - owned holdings

averaged nearly 10 acres, compared to onl y 5.6 acres f or those owned by

14u. S . Department of Commerce, Wor ld Trade Information Service: Economic Development in the Far East and Oceania, 1959 . Part, No. 60-67, Wash i ngt on, 1960.

15Ingrarn, ~., p. 103 .

Table 23. Rubber holdings in Thailand, 1944 and 1945

250 rai (98.75 acres) and over 50 - 250 rai (19.75-98.75 acres) Less than 50 rai (19 . 75 acres)

Total

250 rai (98.75 acres) and over 50- 250 rai (19:75 - 98.75 acres) Less than 50 rai (19.75 acres)

Total

1944

Number of holdings

213 1,915

72 ' 817 75 , 000

1950

241 3,426

87 '780 91,447

Area in holding (in acres)

65 '9 65 71' 100

298 , 225 435,290

61,620 198,290 518 , 820 779' 730

66

Average size of hold ing (in acres)

250 rai (98.75 acres) and over 50 - 250 rai (19.75 - 98.75 acres) Less than 50 rai (19.75 acres)

Over-all ave r age

Source: Ingram,~., p. 102.

309.7 35.9 4 .0 -----s:s

Table 24 . Ownership of rubber holdings in 1949

Holding, under 20 acres Holdings , Nationa lit y of owner Number A1:ea Number

Thai 77,845 423 ,402 1 ' 716

Chinese 5,752 57,220 1,858

Other 151 60 .4 67

Source: Ingram,~., p. 103.

20

266.2 57.7 5.9

----s:s

acres or Area

107,174

130,655

8,147

over

67

Thai, For the most part the Thai rubber grower is a very small operator .

Not much capi tal was needed to develop and operate a small holding

in the past. So , Western capital and enterpr eneurshi p have not played

an important part in the Thai rubber i nd ustry . In the late 1920's

American and othe r Wes t ern interests considered developing the Southern

r eg ion of Thailand . But because of un favor able loca l conditions and the

r efusal of the Thai government to encourage an increase in the numbers

of foreigners in the economy, the American attempts in this region were

soon abandoned.16

In 1949 only 67 planta tion-type holdings, ave raging 90

acres apiece, were owned by foreigners other than Chinese. For e i gners

of non-Chinese descen t , including Europeans, controlled only one percent

of the total rubber acreage in Thailand.

Process ing and Marketing

Small holders usually sell their rubber in the form of raw rubber

sheets and the buyers do the smoking on a large scale. The larger owners

operate their own smokehouses, and they may also have equipment for

washing, congea ling, and rolling the rubber on a large scale. The rubber

merchant s of all l evels ( local, city center, expor ting cen t er) who buy

raw and smoke shee ts also sort, grade, pack, and export it. Some of the

larger plantati ons , i nclud ing a gove rnment rubber plantation, operate

crepe -rubber r o lling fact ori es , and some export crepe-rubber directly.

Mos t smoked s hee t s, however, are expor t ed by rubber merchants, nearly

all of whom are Chinese. 17

16Pendleton, ~. , pp . 203-204.

17 Ingram, ~., p. 104 .

68

Thai rubber has a reputation for a rather poor quality. This is the

result of the low price, or classifying it as bearing a low grade price.

It is f r equent l y said that the fault lay with the Chinese merchants who

do not grade or sort it properly. This part of the problem, in fact,

comes from the small holding - t ype of rubber industry . The growe rs have

different standards, poor facilities and tools, and inadequat e quality

grading. No doubt this is part of the problem . The establishment of

standards has also been hindered by the processing methods of the small

holders. They need t o l earn t o clean and pr epare the rolled sheets

properly .

Williard A. Hanna has explained some basic characteristics of Thai

rubber processing and marketing:

The tappers are also mainly Thai--whether owners, tappers, or share-tappers who t end the Thai - Chinese estates . As a rule, the tappers are also the proces­sors. /Ma rket ing, however, is the function of middle­men, of-whom,_ in Thailand, there are layers upon layers ... . :..1 Instead of using formic acid t o coagulate the latex, they use sulphuric acid, which is cheaper but less suitable and results in a rubber that is deficient in elasticity. They squeeze the liquid out of the coagulate and dry it in the sun, but they rarely go to the pains to produce the neatly waffled evenly smoked, brown sheet for which the buyers pay premium prices.

Once the rubber is ready for market, they sell it to a collector, who smokes it and sells it to shopkeeper, who sells it to a journeyman, who sells it ' to a dealer - ­none of whom neglects to charge a commission.l8

In 1950, the rubber industry furnished employment for about 150,000

individuals and their dependent families . There are ove r 91,000 planters,

18 Williard, A. Hanna, "Peninsular Thailand: Rubber of Haadyai and

the Tin of Phuket," American University Field Staff , Sou theast Asia Series, Vol. 13, No. 25 (October , 1965), pp. 2- 3.

69

50,000-60,000 tappers , and an indeterminate number of factory workers,

merchant s , and othe rs direc tly dependent upon the industry fo r their

livelihood .19

A recent es timate of people who worked on rubbe r planta-

t ions excluding marketing, was made by Boonchu Disayavanic h, of the

Ministry of Agriculture:

From this rough calculation, we can estimate that the rubber industry employs 990,632 people. This is equivalent t o 4 . 52 percent of the population or 6 . 06 percent of the people ID ccupied · in agricultur e.20

Export of Natural Rubber

Rubbe r is a relative newcomer, having become a major export on l y

since the second half of the 1930' s . The growth of Thailand ' s rubber

produc tion and export s, however, has been quite rapid. It was increased

at the rate of about 8 percent per year between 1934-1935 and 1955-1957,

and 7 percent per year between 1960-1964. In consequence, the contribu-

tion of rubber to the total export earnings of Thailand ha s increased

f r om 2 percent during the interwar period 1925-1929, to 13 percent be fo r e

the outbreak of World War II, and t o a s high as 30 percent in 1959- 1960 .

Rubber ha s therefo re far outranked bo th tin and teak, and as mentioned

overtook rice in 1960.

Since 1961 the percentage share of rubber has declined s t eadily

f r om 21 percent of t otal exports t o 13 percent in 1966. During 1961-1966,

the world natural rubber price was shaken by the United States and

Britain releasing their rubber stockpil es and by the strong competition

19Ingram , op. cit., p. 104.

20Disayavanich, ~., p . 21.

70

of synthetic rubber. The average rubber price at Bangkok declined from

$582 pe r ton in 1961 to $442 per ton in 1966 (see Table 25) . At the

same time, Thailand's Government Replanting Scheme of 1960 has started

e ffecting the decreasing volume of produc tion, beginning in 1964. In

any event, the growth of rubber exports has significantly affected

Thailand's balance of payments situation, especially in the postwar

period.

Statistics released by the Depar tment of Customs showed that in

1965, Thailand expor ted a t otal of 213 ,100 metric t ons of rubber to twenty­

six countrie s . 21 Most of the export went t o the Asian countries. Japan

and Singapore and Malaysia were the leading buyers who imported 54,178

and 46,217 metric t ons, respectively. They were followed by the United

Kingdom, the Federal Republic of Germany, Italy, and France ( see Table

27) .

Traditionally, the United States was the most important Thailand

rubber importing country. From 1950-1957, the United States bought more

than 90 percent of Thailand rubber. 22 Since then the United States '

share was decreased steadily, because of he r own production of synthetic

rubber. In 1965, the United States imported only 7,028 metric tons of

Thai rubber--3.3 percent of total rubber exports.

Since 1962 Japan has become the principal Thailand rubber customer,

r ep lacing the United States.

21 Bangkok Bank Monthly Review , November 1965, p. 228 .

22somporn Devsi tha, Economics and Trade Perspective (Bangkok,

Thailand: Progress Printing Office, 1962), p. 44.

Table 25. Quantity and value of principal exports of Thailand from 1957-1966a

T;tEe of ex2ort s 1957 1958 1958 1960 1961 1962 1963 1964 1965 1966

Rice Quantity 1,570.2 1,183.0 1,091. 7 1,202.8 1,576.0 1,271.0 1,417 . 7 1,896 . 3 1 ,895 .2 1,505 . 3 Value 181.1 148.4 128.8 128.5 179 . 9 162 . 0 171.2 219 . 5 216.7 199.9

Rubber Quantity 134.8 138.4 171.3 168 . 2 183.2 192.3 186.9 218.2 213.1 210.0 Va lue 70.3 66.3 116.8 129. 0 106.5 105.6 95.2 103.0 100.0 92.8

Tin Quantity 18.4 9 . 1 13.7 17.1 18.1 19.8 22.0 22.3 20.5 18.9 Value 26 . 1 12.8 21.7 26 . 8 30.9 34.8 37.1 48.1 58.3 65.8

Maize Quantity 64.3 162.9 236.8 514.7 567.2 472.4 744.0 1,115. 0 804.4 1,226.7 Value 3.7 9.7 12.5 27.6 29 . 9 25.1 41.4 67.3 48.5 76.5

Teak Quant ity 75 . 7 72.6 73.3 100.9 64 .5 39.8 32 . 2 40.5 45.2 49.5 Value 13 . 1 12.0 12.2 17. 8 12.6 8.5 6.9 8 . 9 10.1 12.2

Tapioca products Quantity 8.8 151.6 194 . 6 269.7 443.4 400 .8 427.4 738.9 719.4 722.4 Value 6.9 9.6 11.2 14.4 22 . 3 21.2 22 . 0 32.7 33.8 34.2

Jute and Kenaf Quantity 14.6 27.6 37.3 61.8 143.4 237 . 9 125.8 162.1 317.0 485.5 . Value 2.3 3.5 4 . 4 11 . 5 31.3 29.0 12 . 9 24.8 55.1 82 . 6

Others - Value 73 . 0 60.7 70 . 4 82.2 86 . 6 51.0 92.3 112.7 124 . 7 157.4 ._, .....

Total - Value 377 . 0 322 . 3 378.0 430 . 7 499.9 476.5 488.8 617.0 64 7.1 721.4 Source: Monthl;t Economic ReE:ort of the Bank of Thailand, Vol. 7, No . 4 (April, 1967), pp. 44-45. aQuality in thousand metric tons except t eak in cubic metres and value in million do llars.

72

Table 26 . Annual volume and value of Thai land' s rubber exports (in selected periods)

Percentage and Volume Unit value Value total commodity

Period {metric t ons2 {~ I t on2 {million dollars2 exeorts

1925-29 9.780 283 2.4 2. 3

1935-39 38,580 264 10.2 12.9

1948-49 93,392 307 23.6 10.9

1950-51 111,490 738 83.0 26.0

1952-55 115 .714 462 53.9 17.0

1956 134,600 454 73.9 22 . 0

1957 134,833 521 70.3 18.6

1958 138,400 479 66.3 20 . 6

1959 171,300 682 116.8 30.9

1960 168,200 767 129.0 29.4

1961 183,200 582 106.5 21.3

1962 192,300 549 105.6 22.1

1963 186,887 509 95.2 19.7

1964 218,200 472 103.0 16.7

1965 213,100 468 100.0 15 .5

1966 210,000 442 92.8 12.9

Source: For 1925-29 to 1935-39, Ingram,~-, p . 95. For 1948-49 to 1956, International Financial Statistics, Inter-national Monetary Fund, Washington, D.C., several issues. For 1957-1966, Monthly Economic Reeort of the Bank of Thailand Vol. 7, No . 4 (April, 1967), pp. 44-45.

Table 27 . Principle rubber importing countries from Thailand (in metric t ons)

Singapore and West Czechos -

Year U. S. A. Japan U. K. Malaysia Germany Italy France lovakia U.S . S . R. Others Total

1957 119 '978 57 927 11,342 2,348 41 143 134 , 833

1958 92 '723 368 10,780 20 , 863 6,225 20 382 204 6,835 138,400

1959 108,308 16,578 4,277 36,159 4,338 117 457 2,845 1,325 171,300

1960 59,075 40,717 5,007 35,261 14,280 613 189 3,455 7,606 1, 997 168,200

1961 45,690 44,926 19,535 30,142 20,659 4,050 4,068 3,038 6,942 4' 151 183, 200

1961 41 '150 50,742 28, 371 27,515 19,225 5,144 2,190 989 7,401 9,573 192,300

1963 33,352 62,478 23,951 17,308 22,501 10,464 2,747 2,837 3,353 7,896 186,887

1964 13,944 80,815 38,136 27,103 23,235 11 '948 7,438 3,455 12,126 218,200

1965 7,028 54,178 36,293 46,217 25.6 71 11,778 9,415 2,154 1,006 19,360 213,100

Source: Monthl)! Economic Reeort of the Bank of Thailand, Vol. 7' No. 4 (April, 196 7)' pp. 34-35 .

74

Centrally planned countries have recently shown increasing interest

in the natural rubber market. When Thailand cancelled its prohibition

of expor ting rubber t o the Communist Bloc on September 22, 1957, 23

Czechoslovakia and U. S. S . R. became important customers. In 1965 they

imported 2,154 and 1,000 metric tons , respectively.

One important cause of the rapid growth of Thailand rubber produc-

tion and exports has been the strong world demand for rubber . Since

the turn of the centur y aggregate rubber consumption has generally

doubled every decade, increasing at the rate of 7 . 5 percent per year.

Although there has been some slowing down in growth since the end of

the Korean Conflict, the rate of growth remains as high as 6 percent

per year, which exceeds the rate of increase in both GNP and industrial

production of the more highly industrialized countries.24

Due to the rapid rate of increase as outlined before, Thailand

has not onl y participated in the rubber boom but has increased its

share in total world exports of natural rubber from 3 . 2 percent during

that late thirties , to 6.6 percent in 1948, to 7.3 percent during 1955-

1957 and 9.0 percent during 1960-1965 (see Table 28) . In the process,

Thailand has moved from the fif th place to become the third larges t

rubber exporting coun try of the world since 1954, after Malaya and

Indonesia.

The significant rate of gr owth of Thai rubber produc tion and export

over the past two or three decades may not, perhaps, continue after the

23oNEDB, Economic Condition of Thailand 1957 {Bangkok, 1958), p . 54.

24International Bank for Reconstruction and Development, The Prospec ts.

for Rubber, (Unpublished, Washington, D.C., September 11, 1959), quoted

Table 28 . Trend in the share of Thailand ' s export of natural rubber in total world exports (in thousand l ong tons)

75

1934-1938 1948 1955-1957 1961-1966

Thailand 32.1 95 . 9 132.2 200.6

World total 995.0 1,457 . 5 1,817.5 2,221 . 5

Percentage share of Thailand 3.2 6 . 6

Source: Calculation from Tables 38, 39, and 40.

7.3

mid - 1960 ' s. A slowing down has already taken place during the mid

1950's, although it rose quickly again in 1959-1960. This sudden

9.0

increase in the volume of rubber export in 1959 and 1960 may partly

be explained in terms of the r eady response of smallholders to the

high price of rubber during these two years. But the coming into

maturity of rubber trees planted during the Korean boom25 also contributed

to the recent increase i n the volume of rubber export. The increase

is likely to be sustained when, after a certain time lag, the current

program for planting of the new high - yielding var i e ti es bears frui t.

The estimated increase of 2 percent per year from the mid-1950~s to the

mid-1960's was too l ow . In general , the pr esent natural rubber has

lost its price premium in relation t o synthetic. Thailand should concentrate

by Snoh Unakul, International Trade and Economic Development of Thailand, (Unpublished Ph.D . Dissertation (Columbia University, 1961), p . 92 .

25The rubber tree will take 6-7 years to become tappable and 12

years to become fully productive. See Dijkman, ~., pp. 115 - 117, and UNCTAD , TD/B/AC. 2/4, ~., p. 29.

76

on improving quality and yield and thus lowering its cost of rubber

production. I f and when the time comes, the cost of production will

be the most crucial factor determining the volume of exports of natural

rubber, and the high cos t produc er will be driven out of the market. The

relative importance of rubber and its future foreign exchange contribu-

tions t o the total export earning of Thailand thus depends on how

e ffectively the government of Thailand responds to the changing rubber

market condition in the coming decade.

Role of the Government

Perhaps as a result of the absence of an extensive middle c la ss

ther e is little valid public opinion. The Thai knows little and cares

less for international politics and i s only very slightly interested

in questions of internal politics, which are, for him, mostly a matter

of personalities. The people merely wish to be left alone to grow their

rice, catch their fish, and have an occasional festival at their local

Buddhist temple. So, the long-term economic development is initiated

and pushed principally by government policy. Thai tradition believes

that governmen t will provide every means or will do everything for the

people. 26

But, rubb er may be a specia l case whic h was pioneered by the

people, especial l y by those of Chinese descent . The rubber areas were

expanded rapidl y, responding r oughly to the price rise during the

26w . D. Reeve, Public Administration in Siam {London: Royal In­stitute of International Affairs, 1951), pp. 8- 9, and F. W. Riggs, "Modern Thai Administration," Ecology of Public Administration (London: Asia Publishing House , 1961), pp . 87-91.

77

automobile boom in the early part of this century and World War II.

Rubber trees are well suited t o Thai soi ls and climates. Moreove r

it is f it for the small holding and family operations . Rubber trees

need no good soil and can be grown even in sloping mountain areas. The

cul tivation of rubber was considerably more profitable than rice cultiva­

tion,27 because after the tree gives latex it needs little care. The

tree will give latex at l east twenty-five years.

Jmae C. Ingram explained how the Thai government came to involve

the rubber industry :

Rubber was produced in Thailand for several years without license, tax, or other interference by the government. The growers and tapper were independent entrepreneurs and, unlike tin producers, they needed no license from the government to begin operations. Not until the mid- 1930 ' s did the government place an export tax on rubber. The export duty was set at 7 percent ad valorem, and this rat e is still in force (in 1955). The government has encouraged the cultivation of rubber by allowing land to be taken f r om the s tate for a noffiinal fee, and by taxing rubbe r produc tion lightly. A permit must be obtained to plant new rubber but since World War II this has been granted without difficul t y.28

During the Vo luntary Restriction of 1920-1921 and the Stevenson

Restriction Scheme of 1922-1928 in regulating rubber suppl y for improv -

ing price, Thailand was not a member of the cartel. But the high price

maintained by the cartel induced Thai rubber growers t o plant more

rubber, although the acreage figures given before were not accurate

enough to enable us to compare the acreage increase of the 1920's with

that of the 1930's. During the latter decade, however, Thailand was

27Ingram, ~., p . 105.

28 Ibid.

a member of the cartel and new planting was supposed to be rigidly

controlled . 29

78

The International Rubber Regulation Agreement of 1934-1943 was

formed in 1933. The member governments felt that it was necessary for

Thailand to become a member of the agreemen t because of the long common

border with Malaya which facilitated smuggling and reduced the effec tive-

ness of the agreement. Therefore, Thailand was given exceptionally

favorable terms in order to induce her to become a member.

K. E. Knorr expla ined the position of Thailand under the cartel

as follows:

Thailand was guaranteed a m1n1mum percentage of her basic quo ta amounting to 50, 75, 85, 90, and 100 percent fo r the f ive control years from 1934 to 1938. Despite this liberal concession, the Thai parliament r efus ed to ratify the agreement, insisting on an in­crease in its basic quota from 15,000 to 40,000 tons and complete freedom of action. These demands were not grant ed immediately, and the restriction scheme was started without Thailand's participation. Yet her position was so strong, both on account of her expanding production capacity and a geographic loca­tion eminently suitable as a smuggling base, that the country ' s basic quota was increased as demanded for the years f rom 1935 to 1938, and Thailand permitted /sic/ t o extend its rubber plantations by a t otal of Jl,OOO acres.30

Again the result was that the quotas allotted to Thailand did not

necessitate much curtailment of output; indeed, in most years she was

not able to produce her full quota. 31

29McFadyean , ~., pp. 24-47, and Knorr,~., pp. 88-107.

30rbid., p . 114.

31Ibid., p. 248 .

79

Since World War II there has been no restriction on rubbe r produc-

tion. The governmen t has encouraged production through its land policy

and through technical assistance to growers, while at the same time it

has derived revenue from the industry by taxing exports.

Al t hough Thailand is one of the leading producers, yet her problems

are not identical wit h those of most of her neighbors. Most of the

plantations are in the fo rm of smallholdings, whi le most of the rubber-

bearing areas in other producing territ ories are under the efficien t

management of various estate concerns. The smallholders work their

trees on a hand-to-mouth basis. They do not care much about the quantity

of the rubber produced and sometimes lack knowledge and use poor techni-

ques. Virginia Thomson once said that the price received by Thai rubber

is always lower than that for Malayan rubber because Thailand lacks

scientific methods. 32

Another problem about rubber trees which was reported by American

University Field Staff was that:

The rubber trees, for instance, are almost prewar stock, irregularly planted, uneven in growth, and scarred in tapping. Many have been badly tilted by the winds, and many more are badly overgrown with fungi and parasites. The undergrowth i s rarely cleared~ fertili­zers, if used at all, are applied parsimoniously.~)

Although, the above view is rather over sta ted, such as that

most rubber trees are of prewar stock, nevertheless, it is not without

reason and cas ts light on Thai problems.

32virginia Thomson, Thailand: The New Siam (New York: the Macmillan

Company, 1941), p . 480.

33Hanna, ~. , p. 3.

80

Beside all these problems, certain specia l difficulties have arisen

f r om the st rong competition with synthetic r ubber . Synthetic rubber

production and consumption have gone f ar ahead of natura l rubber since

1962-1963. Thailand, however, still looks bright for the f uture of

natural rubber as Sir Harry Melville, the President of the British

Science Research Council says :

Natur al rubber can compete with s ynthetic rubber provided natural r ubber i s so ld at compet itive price

. Natural rubber has certain unique qualities which synthe tic rubber can never hope t o replace.34

Anyhow, the Tha i government is well aware of the world natural

rubber si t uation and her own natural rubber industry. She is convinced

tha t rubber is one of the principal foreign exchange earners , employment,

governmen t income , and National income as a whole . Practically , all

the tasks involved in the improvement of the industry r es t heavily

on the government. The fo llowing are various steps which offer

projec t s in impr oving the Thai rubber industry . 35

Varietal and quality improvement

l. Indigenous varietal selection of rubber. Almos t all Heavea

plantations in Thailand grow by using seedlings resulting f r om natural

crosses of native var i e ti es. Thu s a wide r ange of variations occurred.

The objec t of this investigati on i s to survey and select high yi e ld

3~alayan Strait Time, Se ptember 17, 1965, quoted in Ratana Petchara Chantara, Future Situation of Natural Rubber and Development in Rubber Plantation, Rubber Division, Department of Agricultur e , Min i s try of Agriculture, Thailand, June 15, 1966, p. 8 . (Mimeographed )

35This part is heavily based on Department of Agriculture , Ministry

of Agriculture, Thailand, Para Rubber Improvement Project, 1965, pp. l-3. (Mimeographed)

81

varieties for further planting and distribution.

2. Selection of rubber through the improved varieties. During

World War II several good varieties of rubber have been introduced into

Thailand under government support. The planting of good varieties now

total approximately 24,710 acres (10,000 hectares). The productivity

of the new plant ations were better than those of na t ives, but many

varieties introduced are not of a pure line. The purpose of the inves­

tigation is to select superior lines among these varieties for further

propagation studies .

3. Varietal improvement through hybridization. The ob jective of

varietal improvement is to search for a high yielding plant . However,

owing to past experiences it was found that many of the high yield

plants usually carr y many inferior characters, such as formation of

trunk, susceptible to insects and diseases, etc. The purpose of this

study is to hybridize plants of superior character, study and collecting

the good desirable characters for better planting.

4. Regional testing of rubber varieties . Selected varieties of

Hevea may fit and grow well in certain locations but may not do so in

others. Regional trials for varieties in different locations will

assist in finding out proper varieties to be recommended and extended

to planters.

5 . Quality impr ovement of rubber . Thailand r anks t hird in export­

ing rubber, but 55 percent of the products are of low grade. This does

not mean the raw latex is of low quality; it is mostly due to the lack

of proper technique in processing. For example, many private firms

still use coconut shells in collecting latex instead of porcelain cups

or other equivalents . Fil t ering is still practiced in a primitive way,

82

and there is lack of curing and procession. Since the Thai government

has already ga the red all information needed through previous inves tiga -

tions, the main purpose of thi s project is to extend correct methods

fo r processing, not on ly be r ecommendat ion but also including training,

demonstration , and investigati on of other better methods for processing .

The varie tal and quality improvement mainly was worked through the

government branches in the Ministry of Agriculture . But the principal

works are assigned to the Rubb er Division, Department of Agriculture

and Rubber Organiza ti on. The Rubber Division has branches and stations

sca ttered over the rubber areas in the Eastern and Southern r egions--

altogether, twenty-seven off ices and stations. The Rubber Organization

has the head off ice and rubber plantation at the center of the Sou thern

r egion between Surat Thani and Nakorn Si Thammarat. 36

Impr ovement on cultural practice

The Office of Rubber Replanting Aid Fund has assisted private

rubber planters since 1961. Those who request aid have t o eliminate

their own poor native rubber trees and replant with new approved high

yield varieties. This requires at least seven years before the new

trees s tart t o give products whic h will affect the annual income of

owners . The Thailand replanting scheme will be discussed in de tail in

Chapte r VI. The objec tive of this research is to investigate artificial

means to s timulate the production of old plants, and to prolong their

productive lives in order to overcome the losses during the period of

36oisayavanich, ~- , pp . 166-1 76; and Public Admini s tration

Department, Manual of the Organization of Thailand (Bangkok, Thailand: Mongkol Karnpim, 1961), pp. 220- 221.

Rubber Organization was established under the Rubber Organization Act 1961 . After it has long experience and success in operating and demon­s trating rubber plantation business . At the same time it lends services in rubber field to the gove rnment and the people at large.

83

waiting for the new plantat ions to start yiel ding thei r products .

Soil fertili ty improvement

Generally, the rubber tree can gr ow in any type of soil of ordinary

fe rtility. Like any othe r crops, if ferti lity of soil could be improved,

its yie ld i ng ability would increase remarkedly. Many institutes have

fo und fertilizer formulars and grades fo r the rubber trees under their

conditions. It is therefore the purpose of this research t o find ou t

the proper fe rtilization for the rubber plantation under Thailand's

env ironmental conditions.

Pests and siseas control

Abnormal leaf fall is a common and often destructive disease on

rubbe r plants. In Thailand, the r eduction in yields due t o thi s disease

has been observed in many areas in the Southern regi on. Although young

r ubbe r trees seem to be more suscep t ible t o the disease , particularly

in winter, mature trees have of t en shown a high level of infec tion.

In Ma laya , the fungi Oidium heveae and /or Cloesoporium alborubrum are

the caus al agents.

CHAPTER V

COMPETITIVE POSITION OF NATURAL

AND SYNTHETIC RUBBER

Natural rubber long had a monopoly position in the rubber market.

Today over fifty percent of the annual production of rubber is in the

form of synthetic rubber and this proportion may be higher in the future .

It is perhaps trite, but nevertheless true, that the natural rubber

industry is "fighting for its life." Because of this, raw rubber

has been and continues to be the leading product and export commodity

of many underdeveloped countr i es. Their economic welfare, therefore,

is large l y tied to thi s commodity. The leaders of natural rubber

producing countries ar e confident that the competitive challenge offered

by synthetic can be met.

Ratana Petchara-Chantara, Director of Thailand's Rubber Division,

Department of Agriculture, in his report, "The Future of Natural Rubber,"

reported: "The future of the natural rubber industry is still bright

but the planters have to take an important step with high- yi eld

1 replanting.''

said:

B. C. Sekhar, Director of the Malayan Rubber Research Institute

Synthetic rubber science has been stretched t o the limit. The limit ha s probably been reached in the search

1Ratana Petchara Chantara, Future of Natural Rubber Situation and

Rubber Plantation Development (Bangkok: Department of Agriculture, 1966) ' p. 18.

by scientists for a synthetic that would fu lly rival natural rubber. Eve n though synthe tic is s lightly better in resilience, it does not have the inherent strength of natural rubber . When the scientists tried to i ncrease the s tre ngth of synthetic, they found its resilience had decreased. 2

85

In viewing the present position of the natural rubber industry,

it is necessary to make a careful study of the factors dec id i n g the

compe titiveness of natural rubber and synthetic rubber. Those facto r s

would seem t o be:

l . The s tructure of the rubber marke t and the availabilit y of

nat ural and syn the tic rubber.

2 . Technical advantages and disadvantages.

3. The r e lative price of natural and synthetic rubber.

4. The r e lative production of natural and synthetic rubbe r .

Str uctur e of the Rubber Market

A very important aspect would seem to be that synthetic r ubbe r

plants are usually not inde pendent firms, but belong either to one of

the giant rubbe r-using companies, or t o the equa ll y giant petrochemical

concerns that produce the raw material for synthe tic rubber. Those

rubber manufacturers whi ch own a synthetic rubber plant will not easily

swi tch to natural rubber. As Charles F. Phillips stated:

In terms of production capacity the synt hetic rubber industry is an oligopo l y. The four firm concentration ratio for the general purpose rubber3 producers is 62 percent,

2Ibid., p. 5. Mr. Sekhar lecturing at Penang City Hall and was report~y Malayan Straits Time, Se ptember 29, 1965 .

3There are two major classifications of synthetic rubber . (1) General purpose rubber (Styrene-Budadiene Rubber : SBR), developed t o replace natural rubber in major uses, accounts f or nearly 82 percent of

representing a slight increase over the 1955-1959 period . This oversta t es, however, the concentra­tion of sa l es passing through the actual market, since the largest producers are also the mos t fully integrated. Nearly 51 percent of domestic SBR sa l es are "captive " re presenting eithe r intercompany transfers or sales to affiliated or constituen t companies . 4

86

Although some natural rubbe r plantations are owned by rubbe r using

companies (usuall y tire manufacturers), their importance is small . 5

It is obvious that the exis tence of captive marke ts ensures a

competitive advantage for exis t i ng synthetic producers. The existence

of ca ptive markets is repeated in brief by Mr s. M. J. 't Hooft We lvaar s :

It is stated that in 1960 only 25 percent of budadiene sal es wer e true open market sa l es , 46 percent of sales on the contrary were merel y inter-company transfer .... Regarding sales of gene ra l purpose rubber, captive sales amounted t o 55 per cent of t otal U. S. come stic sales in 1960. Thi s percentage was about equall y divided be tween i ntracompany transfers and sales to affiliated and consti tue nt companies .6

total syn the tic production. (2) Special pur pose rubber (Butyl: IIR, Neoprene : CR, and Nitrite : NBR), developed to replace natural rubber in cer tain uses, account for the remaining 18 percent. In recent years a third maj or t ype , s t ereo regular rubber, has been developed . This rubber has the same unit s tructure as the natural rubber hydrocarbon. Today, ster eo regular rubber has some shared in t he market. See Chapte r II, pp. 26-31 and also Charles F. Phillips, Jr . , "The Competitive Potential of Synthetic Rubber," Land Economics, XXXVI(l 960) , pp. 322-326 .

4c harles F. Phillips, Jr ., ' ~orkable Competition in the Synthetic

Rubbe r Industry, " Southern Economic J ournal, XXVIII(l96l-l962), p. 155 and also see Table l, p. 156.

5 Examples are Goodyear ownership of two large e states in Indonesia ,

Firestone and B. F . Goodrich owning 70,000 and 60,000 acres, r espectively , in Liber ia, Goodyear plants in Guatemala, e tc.

6 UNCTAD , TD/B/AC. 2/4 , op. cit., p. 21.

87

Another advantage is the time-distance. In the Uni ted States,

general l y, the raw material producer can ship synthetic rubber t o the

manufacturer almost overnight and in some cases the y are immediately

adjacent fi rms. For natural rubber, it takes about six weeks between

supp lier and factory.

Availability of synthetic rubber will in all probability continue

to be exce llent . The present overcapacity of synthetic rubbe r plants

is not very likely t o be diminished appreciably in the near future.

Technical Advantages and Disadvantages

In an address befor e the International Institute of Synthe ti c

Rubb er Producers' Conference~ which was held in Brussels, Belg ium, on

May 11, 1962, George R. Vila, Pres ident of the United States Rubber

Company , outlined the fac t ors determining the manufacturer ' s preference

be tween natural and the various types of synthetic rubber . He selected

five f actors most important for scoring performance. They are: wear

resistance, heat buildup, groove cracking r e sistance, ch ipping resis-

tance, and aging resistance. 7

According t o Mr. Vila, natural rubber is s till consider ed pr e tty

good in wear resistance. It is particularly durable at coo le r driving

t emperatures . The cold count r ies like Sweden pr efer na t ural rubber

because of this fundamental advantage . Low hea t build up remains the

best advantage of natural rubber, and makes it especially valuable for

7Geor ge R. Vila, speech delive r ed before the Internati onal

Institute of Synthetic Rubber Pr oducers in Brussels, Belgium, on May 11, 1962.

88

heavy duty tires. Although natural rubber starts to crack sooner than

synthetic rubbers, its cracks deteriorate more slowly. Natural rubber's

chipping resistance is outstanding and becomes the standard to which

all synthetic rubber strives. However, natural rubber is relativel y

deficient in resistance to aging. Natural rubber has been approached,

but never excelled by the synthetics in ease of mixing. It still

reigns supreme in building tack (adhesiveness) a l so, but when natural

rubber is cured above 140 degrees centigrade, the problem of polymer

deterioration arises.

In order t o provide a clearer picture of the comparative technical

competition between natural and synthetic rubber, P. C. Ratchaga has

divided the general purpose rubber market (the largest sector of rubber

market) into three zones:

1. Natural rubber zone

2. Synthetic rubber zone

3. Competitive zoneS

The natural zone is that portion of the general purpose market in

which natural rubber is preferred to synthetic rubber. Synthetic

rubber is preferred to natural rubber in the synthetic zone. In these

two zones, physical characteristics are the most important factors in

deciding which one to be used . There is still some degree of competition

in these two zones, especially if the price difference between the

two commodities is too large. The competitive zone is the fraction of

the market fo r general purpose rubber where the two commoditie s are

8P. C. Ratchaga, "The Future of Malay's Natural Rubber," Malayan

Ec onomic Review, I(l956), pp. 42-47.

89

competing with each other and price is the on ly factor in deciding which

one is t o be bought .

T. R. McHale made a brief conclu sion about these three zones as

fo llows: ·

In Zone 3, the ultimate choice be tween syn the tic or natural has revolved around price or cost conside ra­tions . If the cost o f natural were l ower than the cost of synthetic relative t o the value of the final product, then natural was selected. As we shall see, recent developments in the syn thetic field threaten to vir­tually eliminate Zone 2, where natural enj oys a t ech­nical superiority and t o increase Zone 3 where there is competition between the two.9

The division into these three zones is made after deducting

special purpose rubber f r om the t otal rubber market, since nearl y all

special purpose rubber is now made from synthetic rubber.

Dr. J. N. Street, Dir ec tor of Laborator ies, Firestone Tire and

Rubber Company, estimated the respective sha r es of the three zo nes as

fo llows: Natural rubber zone, 27 percent of the t otal general purpose

rubber requirements; synthetic rubber zone, 38 percent; competitive

zone , 35 percent . 10

All three zones are not "complete l y black" or

"complete ly white " but all of them involve a certain degree of "grey ."

Even i n the competitive zo ne the two types of rubber are not absolutely

sa tisfactory substitutes. However, small price differential s are

significant and if maintained over a period of time will bring about

a large switch over within this area.

9r. R. McHale, "The Competiti on Between Synthetic and Natural Ru ber," The Malayan Economic Review, VI(l96l), p . 24.

10J . N. Street, Natural Rubber News, December, 1954, quote in "Ratchaga, 11 o p. cit . , p. 45.

90

Ratchaga conc l uded that if the price of natural rubber were higher

than the price of syn thetic rubber, only 27 percent of the general

purpose market would be ca ptured by natura l rubber. But if the price

of natura l rubber could be l owered to a level be l ow that of synthetic

r ubber , it is possible that total consumption will be 62 percent ( 27

+ 35 percent) of all t o t al general purpose rubber, assuming, of course ,

that the supply can be sufficiently i ncreased. In the s ame way, if the

price of synthetic rubbe r remain s l ower than that of natural rubber, the

total consumption of synthe tic rubber can be as high a s 73 percent (38

+ 35 percent) of total general purpose rubber consumption--if, that is,

supply can be sufficiently increased .11

Thus, if the producers of natural rubber can reduce their cos ts

so as to enable them t o offer their products in the international

market a t a price l ower than a price of synthetic rubber , the future of

the natural rubber industry can be bright . There is no reason, of

course, t o assume that the entir e 62 percent will be r ealized since most

synthetic rubber plants in the United States are in the hands of the

tire manufac turers. 12 Bu t the argument serves t o show that the market

for rubber is divided according t o the two aspects of compe tition men-

tioned above, and how the share of the t wo rubber industries ma y be

c hanged by varying the price and cost structur e.

The othe r aspect of competition is the technical advantage of

synthe tic rubber because of its uni fo rm quality. Because it is a synthetic,

11rbid., pp. 46-47.

12Robert Solo,"The New Threat of Synthetic t o Natural Rubber, " Southern Economic J ournal, XXII(l955 -1956), p. 57 .

91

man-made product, its chemical composition is known and can be control-

led. Moreover, producers can tailor synthetics to the needs of customers.

In contrast, the quality of natural rubber is far from uniform, varying

considerably among estates, small holdings, and producing countries .

This is one problem that has confronted rubber manufacturers for many

years. In a discussion of crude rubber quality problems the Rubber

Manufacturers Association reported in 1952:

The tremendous growth of small holders production compared to European-managed estates has created trans­port and distribution problems. The emergence of many new middlemen-traders and commercial packers having primary interest in short-term and speculative profits has brought emphasis on quantity rather than quality. Periods of excess demand and the large differentials between grades created incentive to upgrade, mix grades and otherwise engage in unscrupulous practices. 13

Recently, as a direct result of the emergence of the synthetic

rubber industry, attempts have been made to improve this situation, both

for export ing and importing nations. Natural rubber quality, including

poor pack, moisture in bales and mixture of grades, has been the prom-

inent topic of discussion and consultation. New grade specifications

have been adopted and accepted by producing and consuming countries

alike. As a fur ther aid, the members of the New York Commodity

Exchange adopted a new rubber contract, 11Standard Rubber Contract, "

in 1961.

The new contract basic grade is No . 1 International Ribbed Smoked Shee ts. Rubber inferior t o this grade is deliverable at discounts f or half-grade but not as low as No. 2 International Ribbed Smoked Sheets.l4

13w. J. Sears and C. C. Miller (eds.), Natural Rubber Buying (New York: The Rubber Manufacturers Association, Inc., 1953), p. 10.

14Rubber Age, March, 1961, p . 1050.

92

In 1965, Dr. Lim Swee Aun, the Malaysian Minister of Comme r ce and

Industry, announced that Malaysian producers are shortly t o market

natural rubber to a guaranteed t echnical specification, Standard Mal ayan

Rubber (SMR), in convenient plastic-covered bales. 15 The SMR has

quali fic ations roughly as followed:

The specification for SMR is broadly similar to that proposed by the International Organization. There will be three basic grades, SMR 5, SMR 20, and SMR 50. These wi ll be graded according to purity as measured by the content of particulate dirt and other injurious contam­inants, rather than by visual appearance as at present

Minimum levels of dirt content are 0.05, 0.20, and 0.50 percent, respect ive l y , for the three grades.

The greatest advantage synthetic rubbers have over natural rubber,

however, is the vast amount of research and technical assistance that

goes into the production and use of synthetic rubber. According to Dr.

L. Bateman, Chairman of the Malaya n Rubber Fund Board, in an addre ss

in Tokyo in May 1964, the annual research expenditur e on syn thetic

rubber i n the United States alone amounted to $124 million, where total

r esearch expenditure for natural rubbe r over the world onl y added to

$6 million .16

Any improvement ei the r in composition or in pr oduction

processes is mainly sought for i n the field of synthetic rubber, and

thus s timulates its use, while extension of the se developments to the

natural rubber field is hindered by lack of funds, and perhaps by

lack of coordination of research.

At present the manufacture of rubber articles is still labor inten-

sive; changes t o a capital intensive production process might considerably

15Rubber Development, XVIII(l965 ), p. 21.

16 UNCTAD, TD/B/ AC, 2/4, ~ .• p. 23.

93

lower costs. Expe riments in this direction are pushed through by

synthe tic r ubber producers, who have made s pecia l solution polymers

for this pur pose. I f a s tage were r eached where this process is possible

fo r certain synthetic rubber, while it would still be impossible fo r

natural rubber, its labor cost saving aspects might l ead t o subs titu -

tion away from natural rubber t o syn the tic rubber , even if the la tt er

were mor e expensive raw material. 17

This aspect should no t be neg lected, es pecially as the main c onclu-

sion from previous paragraphs would seem t o be that in certain fields

of usa ge natural has no definite technical advantage ove r synthetic.

It would on l y be bough t at a price lower than that of synthetic rubber,

owing t o its shortcoming, both in constant availability and technical

spec i f i cati ons .

The Relative Price of Natural

and Synthe tic Rubber

If there were no qua lity difference between natural and synthetic

rubber, it would be perfectly justi fiab l e to say that the price com-

petition be tween the two commodities was alr eady over and had been won

by synthe t ic rubber . This would be justifiable since the price of

natural rubber, except in 1949, has been always highe r than the price of

synthetic rubber. A trade j ournal for the rubber industry recently

s tated:

In the past, natural rubber has normally c ommanded a fai rly substantial premium ove r general

17Ibid.

purpose syn the tic r ubber, because of its superior over-all qualities , but a new situation is now deve l oping as a result of the evolution of stereo­specific rubbers .. . It is now quite clear that, more than ever in th e past, the natural rubber indu s tr y has t o face compe tit ion from man-made rubber on the basis of price, rather than qual ity . l8

94

The truth of this statement can be questioned, but its impl emen-

tation raise s many compl e x problems.

In the past, natural rubber pric e have borne littl e relationship

t o production costs. The suppl y curve of natural rubber is relatively

ine last ic in the short run, large l y due to the seven to ten year s

waiting-period be tween planting and tapping . In the short run, there -

fore , produc tion costs will have little effect upon the "free 11 market

price of natural rubber. But because demand conditions are subject to

continuous change, price show wide f luctuations over a period of years,

or even from one month t o another. Dr. C. R. Wharton, Jr. Malayan

economis t, made a brief view· about demand, supply, and price of

natural rubber that:

The threat of economic instability is certainly not due exclusively t o supply charact e ristics alone. Demand factors are equall y important shifts in demand due t o exogenous fac t ors s uch as wars, threats of war, stock piling decisions, deve l opment of sbustitutes and their prices . ... The short run in elastic ity of su pply of rubber shou ld not be neg lected in the formula­tion of policies designed to cope with the threat and r eality of instability. Given an inelasticity in supply, any shifts in demand merely aggrevate the fluctuation s in price and the resulting instabi lit y . Second , t he long-run inelasticity of supply which has very serious economic im­plications fo r r esource al location and mobility shou ld be taken into cons ideration.l9

l8Rubber Age, January, 1962, p. 676 .

19wharton, ~., p. 162 .

The following are brief (actors that influence natural rubber

prices, primarily from the demand side.

95

1. Economic conditions in consuming count ries. General economic

conditions in consuming countries raise or depress price of imported

crude rubber. Undoubtedly, this is the most significant factor affect­

ing the long-run price of natural rubber.

2. Political disturbance within the rubber producing countries.

Prices are particularly sensitive to political disturbances that block

or threaten supply . The good example is the price of natural rubber

rising from 27 . 8 cents per pound (second quarter of 1950) to 73 cents

(first quarter of 1951) after the attack on Korea.

3 . Bilateral barter agreement. The supply of crude rubber is

further effected in any particular year by the number of trade agree­

ments arranged between producing countries and buyers. In 1959, t o

illustrate, Ceylon exchanged 30,000 tons of rubber with Red China for

250 ,000 tons of rice. It was not until the following year, therefore,

this rubber producing country re-entered the rubber market and then only

for a shor t period of time.

4. Centrally planned countries purchases. In the past few years,

buying by the Communist Bloc ha s had important effects upon crude rubber

prices. In 1961, Russia purchased an es timated $76 mill ion worth of

Malayan rubber, compar ed with about $50 million the preceeding year. 20

Chinese purchases, too, have become significant. As these purchases

are unpredictable, they add to market f luctuation.

20Phillip, ~. , p . 165 .

96

5 . Stockpile programs . In recent yea r s t he wor ld rubber market

has been strongly influenced by the specific government policy relating

to the strategic stockpiling program in the Uni ted Kingdom and the

Uni t ed States. This policy is still a C<' ntrove r sy between rubber

producing countries and both consum rs.

These f i ve factors are significant in explaining variations in

natural rubbe r prices. Some are common to al l raw materials; others

are particular t o the rubber market. Over a l onger period, it is

expected that the s tabil ity of synthetic rubber prices will r educe

fl uctuations in the price of natural rubber (see Table 29).

Table 29 shows the average s po t price of R.S.S. l t ype of natural

rubbe r in New York and the average price of three major synthetic rubbers.

The prices of synthetic rubbers are overs tated because the quota tions

do not show the discounts which are almost the rule, bringing the price

down by one or two cents . Synthetic rubbe r prices are moreover

quo t ed on de livery , whereas the natural rubber price is the New York

c .i. f . price t o which fur the r t ransport cos ts must be added.

The situation in 1949, when the price of natural r ubbe r was actually

l ower than the price of syn the tic rubber, indicates that at that time

price competition was s till in pr ogress and almost won by the natural

rubber industry. Tire manu f acturers, who we re required t o con s ume a

certain amoun t of synthetic rubber , demanded tha t the synthetic rubber

plant s be abandoned and suggested that the stockpiling plan alone be

tru sted to provide securi t y .21

But before some r eal actions were taken,

21Rob ert Solo, "The Sale of Synthetic Rubber Plants," Journal of Indust rial Economic, II(l953), p. 37 .

97

Table 29 . Price of rubber 1946- 1965 (cents per pound)

Year

1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

19 65

Natural rubber average N. Y.

22 . 5

20.8

21.9

17. 6

41.3

60.9

38.6

24.1

23 .4

39. 0

34.3

31.1

28 .2

36 . 5

38.5

29.6

28.5

26.3

25.2

25 . 7

Synthetic rubber SBR Butyle Neoprene

18.5 18 . 0 27.5

18.5 18.5 29.4

18.5 18. 5 32.0

18.5 18.5 32 . 0

19.0 18.7 34 .0

25.0 20.8 38.0

23 . 5 20.8 38 .0

23.0 21.3 40.0

23.0 22.5 41.0

23 . 0 23 . 0 41.0

23.0 23 . 0 41.0

23.0 23.0 41.0

23.0 23.0 41. 0

23.0 23.0 41.0

23 . 0 23 . 0 41.0

23 .0 23.0 41.0

23 . 0 23.0 41.0

23 . 0 25.0 41. 0

23.0 25 . 0 41.0

23.0 25.0 41.0

Sour ce: For the price of natural rubbe r, Commodit y Yearbook , several issues . For synthetic rubbe r, Rubber Statistical Bul l e tin, several issues.

98

the Korean Crisis had cuased the price o f natura l r ubber to r ise again

and the objec tions of the synthe t ic rubbe r consumer faded awa y .

Now, we can ask whether or no t t he s yn the tic rubber industry has

been competitive in terms of price s ince 1949. The fac t that the price

of natural rubbe r was higher than the price of synthetic rubber between

1950-1965 doe s not necessarily mean that the synt hetic rubber industry

has been competitive relative to the natural rubber industry in terms

of price . In order t o be able t o dec ide what the situation really is,

we have t o take the quality di ffe r ence between natural and synthetic

rubber into consideration . A price difference must allow fo r this

quality difference . Af t e r such a price dif fe r ence is deducted from the

price of natural rubbe r, then the above question can he answered

cor r ec tly.

The Relative Production Cost of

Natural and Synthe tic Rubber

The possible eme r gence of the price competit ion between natural

and synthetic rubber makes it imperat ive to cons ider the ir respective

production cos ts, and the possibilities of l owering either in the

long run. As wi th quality, natural rubber costs var y subs tantially

be t ween pr odu c ing countries . The r e lat ive cost invo lved in producing

na tural rubbe r and its synthetic counterpart now becomes the dominant

variable in the l ong run pattern of development.

One line of s tud y shows that an initial capital outla y for the

cons truct ion of an optimum size plant producing SBR per year i s e stimated

at $10,000,000 . An initial capital investment of $250 must be made for

99

every ton of rubber to be produced each year. 22 On the other hand,

McGavack estimated that about $500 per acre is required to bring planta -

tion rubber into maturity, if starte d f n ,m scratch. A production of a

little more than a ton of natural r ubber per acre per year is calculated.

Therefore, the initial capital inves tment in modern plantation rubber is

approximately twice the capital cost which is required to produce a ton

of synthetic rubber in the most efficient size plant. However, the life

of a plantation is about twice as long as that of modern synthetic

rubber plant . 23 Thus, it appears that over a long period of time the

relative capital outlay to produce a t on of ei ther natural or synthetic

rubber is about the same .

As to the labor cost , plantation labor cost is greater than that

of the synthetic rubber industry because a muc h greater number of laborers

is used per unit of production. However, the plantation rubber industry

has the offsetting advantages of a much lower rate of wage for hand

labor. It seems possible that this advantage will last for a long time

to come.

In addition, several recourses to overcome the necessity for this

greater employment of hand labor are available to the plantation rubber

industry. Replanting with high yielding clones, a new t echnical develop-

ment known as stimulation, which requires only small amounts of particular

chemicals at infrequent times to increase the yield of rubbe r trees,

and mechanization of some of the production process may outstrip the

22c. H. Chilton, Chemical Engineering, VI(l958), pp. 102- 105, as quoted by John McGavack, "The Future of Natural Rubber," Rubber Age, 91, February, 1959, p . 791.

23McGavack, Ibid . , p . 793.

100

current disadvantage of employing a greater number of hand laborers.

The strongest basis for Dr. McGavack 's belief that production cost

of syn thetic rubber will always be higher than natural rubber lies in

the assumption that all of the raw ma t erials which go into the produc-

tion of synthetic rubber have to be produced at a relatively high cost .

In contrast to the synthetic material, virtually the entire ingredients

required in the production of natural rubber ar e free. More specifi-

cally, the carbon dioxide of the air, the mineral substances from the

leaf drop of the trees, the tropical soi l, containing minerals and

water, and sunlight in quantities more than sufficient to polymerize

all the rubber are all there for the a sking.24

The other approach is in terms of cost reducing competition be ­

tween natural and synthetic rubber. 25 It m ~ght bring the price of

natural rubber do1.n to the point where it becomes unprofitable t o

produce synthetic rubber in existing plants, l e t alone to create new

capacity .

Dr. W. E . Cake, in a 1962 article "The Position of Natural and

26 Synthetic Rubber in this Changing World," es timated the selling price

of various types of synthetic rubber that would be necessary:

1 . To continue production at all

24Ibid . , pp. 795 - 796 .

25This part is based on Mrs. 't Hooft Walvaars' study, preparing for UNCTAD. UNCTAD, TD/B/AC . 2/4, ~., pp. 25 - 31.

26w. E. Cake, "The Position of Natural and Syn t hetic Rubber in t he Changing l~orld," Revue General de Caoutchouc, 39, 1962 , quoted in Petchara Chantara, ~. , p . 7.

101

2. To establish new plants.

The selling price required to continue production at all

would only have to cover variable costs; it would contain no coverage

of fixed costs or research. These variable production costs are lower

in the case of integrated concerns, where the raw material is acquired

f r om producers within the same concern. The selling price necessary t o

continue production at all would be between 12.2 and 15 . 8 cents per

pound for SBR and 14.5 to 18.5 cents per pound for Cis-polybudadiene.

The selling price required to establish new plants, i.e . a price

covering all costs and promising a 10 percent return on investment

would be 23 .8 cents per pound for SBR, in the case of non-integrated

production and 26 cents per pound for Cis-polybudadiene, non-integrated .

This required selling price for SBR seems ra the r high; even if the

largest price differential resu l ting from integration, put at 3.6 cents

under (i), would be substracted, the SBR price necessary t o obta in a

10 cent return on investment would still be 20.2 cents .

In 1964 a paper for the Internationa l Rubber Stud y Group by

Messrs. Buckler and Sykes stated that compound costs of SBR were de­

clining steadily, without however quoting figures . 27

With respect to Cis-polyisoprene, the synthetic rubber most likely

to displac e natural rubber from the purely technical point of view,

these authors assume that it will continue to remain too expensive in

comparison to natural rubber if the price of natural rubbe r continues

to fall. The existence of Cis-polyisoprene would thus be not so much a

27UNCTAD, TD/B/AC. 2/4 , ~., p. 25 .

102

threat t o natural rubber but an insurance against rising natural rubber

prices a nd natural rubber shortages . 28

A poss ible cost reduction in the synthet ic rubbe r industry might

stem from a lower price of the chemical raw material . The ma in chemical,

budadiene , was quoted i n 1956 at around 15 cents a pound and 1961 at

12-3/4 cents a pound. It is est ima ted that it could drop t o 10-1/2

cents a pound. 29

Considering the heavy amount of research in the synthetic industry ,

a lowering of cos t s through innovations seem always possible.

In the natural rubber industry an impressive process of cost redUc -

tion i s und erway . The information from the papers presented by Dr.

L. C. Bateman,30

t o the International Rubber Study Group mee tings in

Washington and Tokyo, in 1962 and 1964, r eve aled the fo llowing:

The reduction of production cos t s of natural rubbe r wou ld seem

possible in three ways:

(1) Rejuvenat i on pr ograms , as newer trees have been developed

with a f ar highe r yield,

(2) Mo r e sys t emat i c manuring and yi eld - s timu lat ion,

(3) Exploitation of f undamental research.

The last point , though of very grea t importance, is as yet diffi -

cult t o express by figures. The possible results of replanting or

new planting can be judged f r om the fo ll owing figures:

28Ibid., p. 26.

29Ibid.

301 . C. Bateman, "The Competitive Prospects of Natural Rubber over the Next Ten Years --The Suppl y of Natural Rubber," The Future of Natural and Synthe ti c Ru bbers, Proceedings of a Symposium organized by the Inter­national Rubber Stud y Group in Washing t on, D.C., May 20 t o June 1, 1962; and UNCTAD, ~., p. 26.

103

Unselected stock 400 lbs . /acre per year

Pedigree clones (of the 1920's) 800 lbs./acre per year

Pedigr ee clones (of the 1930's) 1,100 lbs./acre per year

Pedigree clones (of the 1940 ' s) 1,500-1,600 lbs./acre per year

New pedigree clone, recently in exp l oitation

2,000 lbs. / acre per year

Avery new pedigree clone, R.R .I.M. 600 stil l in the experimental stage

3,000 lbs . / acre per year

As the di scussion was already mentioned, at a selling price of

SBR would be between 12.2 and 15 . 8 cents a pound, the synthetic factorie s

will still be in business. If the natural rubber wants t o gain ground

on SBR, natural rubber should not cost more than 15 cents a pound. As

a r esult of a steady incre as e in productivity , this does not seem an

imposs ible cost price fo r natural r ubber t o reach.

The fo ll ow ing s tatements are quoted from Mr . 't Hoof t We lvaars,

whose com pilations show various researches in the develo pment of reduc -

ing natural ru bber cost:

A report by Mr. Phillip F . Adam, the Secretary­General of the Internationa l Rubber Study Group, states that in order t o i nduce a c hange from SBR t o natural rubber usage a price of below 16-2/3 cents a pound would seem t o be required.

Mr . Bateman, i n 1962, thought it prudent to aim at a natural rubber price of 18 cents a pound, which in his opinion would leave the natural rubber industry en tirely viab l e.

In May 1965 Mr . R. Ormsby , in a paper en t itled "Poten­tials in Rubber--A Consumer's Review , 11 mentioned that for Malayan es tates New York cif cos t has been

at the 1961 ave rage outp~ 690 lbs . /acre, at the 1964 avera ge output 800 lbs. / acre , at the 1970 es timated out put 1, 200 lbs./acre,

31 Ibid . , pp. 30-31.

20.5 cents 17.5 cents 12.0 cents3l

104

On this basis, Mr. Ormsb )' i s o f th "" o pinion t hat natural rubbe r

producers will be in an exc e ll pr.t r~ iti on t c1 c ompete cost-wise with

synthetic producers.

On smallholdings r eal pr oduc ti<'n r osts, in the sense of the real

effort to produce one pound of rubbe r , ~ r e doubtlessly higher than on

estates. This does not mean however that smal lholders will stop produc-

tion when the natural rubber price would only be sufficient to cover the

cost of fairly efficient es tates. This wo uld depend on the speed with

which the price declined and on the alternative means of livelihood .

Some natural rubber from smallholders wou ld doubtlessly still be forth - -

coming at a price consid e rabl y lower than the present one.

An economic mission from the International Bank for Reconstruction

and Development i n the Federation of Malaya in 1955 r eported as follows:

Cost data from a r e presentative c ross-s ec tion of rubber estates indicate that the pr duction of high-yie lding rubbe r on we ll-ma naged estates could continue to compete profitably with synthe tic rubber even if prices of the latte r were to fall well below present levels. Smallholdings on high-yielding rubber cultivated mainly with family labor or on a cr op­sharing basis would be even less vulnerab le to lower synthetic rubber prices . And it seems clear that high-yielding rubbe r tree, once they reach bearing age, pr omise a return greater than that of any o ther crop for which the vast ma j ority of smallholding would be suitable . 32

32 Inte rnationa l Bank for Reconstructi on and Development, The

Economic Development of Malaya (Balt imore , Maryland: The John Hopkins Press, 1955), p . 48.

CHAPTER VI

THE PRESENT AND FUTURE SITUATI ON OF

THE NATURAL RUBBER INDUSTRY

General View of Natural Rubber Pr oducers

The natural rubber producing countries ha ve long realized the

seriousness of the problem they have faced, for the exportation of

rubber is one of their most important sources of exchange . This is

true fo r Malaysia, Indonesia, South Vietnam, Ceylon, and Thailand.

Improvements that would l ead t o reduction in cost had been known s ince

the period befor e World War II, 1 but t he war prevented the producers

f rom introducing them, and at that time the need to take some cost -

reducing mea s ures was no t so pressing .

At present, the most widely adopted met hod to reduce production

cost of natural rubber is the replanting of plantations with high

yield ing trees. In almost every country some kind of replanting pro-

gram ha s been designed and carried out . In almost all of them the

government s are active in t aking part in the execution of the plan.

But the degr ee t o which the programs have been carried out are di fferent

in differ ent countries. There fore , a discussion of the individual

countries is preferable to a discussion covering the countries as a

whole.

1s . Moos, "Natural versus Synthetic Rubbe r," Oxford, Institute of Statistic: Bulletin, V(l943), pp. 51-55 .

106

The Federation of Malaysia has proved the most successful in

replanting her rubber plantation. She has been engaged in replanting

schemes since 1955. With the large subsidy from the government, over

150,000 acres are currently being replanted per year, or about 4 percent

of the total land used for rubber production . At this rate, Malaya

expec ts to have completely high-yie ld acreage not later than 1973,

capable of producing an annual output of 1.2 million tons. 2 Today

more than 2,560,000 acres or about 60.7 percent of the total rubber

planted area has high yielding trees, as shown in Table 30 .

For Malaya today, the most important problem is time . The price

of natural rubber should remain fairly high and stable so that she can

complete the replanting scheme without too many difficulties. Thi s is

und erstandable since some of the funds used to finance the replanting

scheme have been obtained from export taxes . 3 The replanting scheme

has begun to show results at the present time. Until 1959, Indonesia

had been the world's leading producer of natural rubber. Since the

war, Malaya has forged vigorousl y ahead with the planting of new high­

yielding stock and is now well established as the leading producer. 4

Indonesia, the second largest producer of natural rubber, is

still very far behind Malaya in replanting her plantations though s he

2The Wall Street Journal, January 11, 1961, p. l; and Rubber Age,

May, 1961, p. 313.

3Lim Chong Yah, "The Malayan Replanting Taxes," Malayan Economic

~' VI(l96l), pp. 43- 52 .

4D. D. Humphrey, "Indonesia ' s National Plan for Economic Develop­

ment, " Asian Survey, II(l962), p. 13 .

Table 30. Composition of rubbe r ac r eage in Malaya , 1966 (in 1,000 acres)

Mature

107

Total Prewar Postwar Immature

Estate 1,910 600 825 485

Smallholding 2,310 1,059 414 837

Total 4,220 1,659 1,239 1,322

Source: United Nations Confe r ence on Trade and Development, TD/B/AC. 2/4, 4 January, 1966, pp. 27-28.

has 4 . 4 million acres of rubber trees under cultivation.5

A replant ing

program is also underway in Indonesia,6

but no substantial increase in

rubber exports from the country can be expected for the next few year s.

Because of t he unfavorable political climate in the coun t r y (War of

Independence, 1945-1950 , Local and Army Rebellions, 1956-1962, Commun -

ist's failure Coup d'tat, 1965) discouraged the owners of the plantation

from replanting their acreage. Moreover , f or eign estate owners, such

as Britis h and United States interest, have f aced t wo major problems,

the exchange pr oblem and the poss ibilit y of nationalization . 7 It

r ema ins t o be seen what the Ind onesian government will do t o increase

the speed of such a replanting plan now the political situation is

more stab l e .

5Phillip, ~., p . 150.

6rndonesia has been in a replanting plan since 1956. This re ­

planting plan, designed for the ten- year period from 1956 to 1965, ca lled for the replanting of 26,000 hec t ares per annum . U.N. Economic Survey of Asia and the Far East, Bangkok, 1961, p. 111.

7Phillip, ~. , p. 152.

108

The present cond ition of the rubber plantations of Indonesia is

sti ll best described by Humphrey :

In rubber, as in other sector s , Indones ia ha s been living off of her capi tal s ince the trees have a productive life of 35 years, Indonesia still harves t s from prewar planting. Owing to neg l ec t of r eplanting 30% of es tate trees are now over 35 years old a nd additional 25% are ove r 30 years . Smallholders acreage which amount to more t han 70% of the total, though it accoun ts for about 60% of production, is in a s till worse condit ion owing t o the over - age trees . 8

The task of a replanting scheme in this country is muc h heavie r

than in Malaya . Immature trees which will come into produc ti on during

the next yea r consist of no more than 12 percent of the es tate area

and 3 percent of the smallholder area. 9 A recent r e port revealed that

if their af fa irs are straightened out in the next few years we might

10 expec t some improvement, per haps another 50 ,000 tons or so a year .

Thailand has the potential o f becomin g an important rubber pro-

ducing country. At the end of 1959, only 11.2 percent of the t otal

rubber plants wer e classified as high - yie lding trees. 11 The r e planting

program i s slow when compared with Malaya and Ceylon . A 1960 r e port by

F. A.O . called the attention of the Thai gove rnment to thi s fact:

The planting of rubber can no l onge r be looked upon, like in the pas t, as some thing that will take place of its own accord , without government he lp, advice, or control, according to the whim and will of a multitude of private individuals. The mere planting of new acres is not enough, they must be plant ed with the best available mate rials and according to up t o dat e techniques. Thailand can continue t o i gnore the hundreds of thousands of acres

8Humphrey , ~-, p . 13.

9Ibid . ,

lOH. C. Bugbee , "Natural Rubber's Place in the World Picture ," Rubber World, XV(l966), p . 95.

of low yielding rubber which are gradually , but sur ely becoming uneconomic a•1d are yearl y i ncreasing in numbe r.l2

109

Thailand ' s Rubber Replanting Act was drawn up in 1955, but little

concre t e action was t aken by the government until the Rubber Plantation

Aid Fund Act was passed on August 25 , 1960 . According to prediction

of the World Bank, the potentiality fo r expanding the productivity

capacity by means of develo pmen t of unu sed land in Southern Thailand

suitable for rubber trees was r egarded suff icient to increase the rubber

area two fo ld, with the possibility of tripling if these were terracing

of the usable hill country . 13 (The deve l opment of the Thailand replant-

ing program will be discussed later in this chapter.)

The government of Ceylon fol l owed the policy established by the

Ma layan gove rnment. Cey lon is now farther than Indonesia in her planting

scheme . But a new planting policy prohibits cultivati on of new rubbe r

without permission of the Min i ster of Agriculture and Land s . The present

Government subsidized rubbe r r eplanting scheme is the third five years

program t o be put in effect (the f irst and the second five years

program was f r om 1953 to 1958 and 1959 to 1963, respective ly). It is

hoped that Ceylon ' s tota l of 668,000 acres of rubber plant s will have

been comple tely r eplanted by the end of 1968 and the output of rubber

12F. A. 0., Expanded Technical Assistance Programme, Rome, 1960,

No. 1253 i s cited in the Far Eastern Economic Review , July 27, 1961, p. 182.

13 Inte rnational Bank fo r Reconstruction and Development, A Public

Develo pment Program for Thailand (Baltimore , Maryland: The John Hopkins Press, 1959) p. 71 .

110

will increase to about 160,000 long tons a year. 14

Elsewhere in South and Southeast Asia, Pakistan has recently

entered upon a rubber growing program in Eastern Pakistan, Chittagong,

and Sylhet. Their climatic conditions approach those in the Malayan

forest. There has not been much progress. In India, where most

rubber is produced by smallholders in Kerala Province and yearly averages

are low, the government has recently announced a modernization program

of planting and tapping. 15 In 1964, there were about 381,000 acres of

rubber trees and 6,519 acres were newly registered under the Rubber

Act of 194 7. 16 Finally, in Indochina, one-third of the cultivated

plantations were subjected t o war damage. However , Indochina rubber,

according to trade reports, is of high qua lity, c l ean, and well packed .

With the excep tion of Vietnam, which, despite the war, is still ex­

porting some rubber, the outlook is good . 17 Cambodian estates , according

to a Rubber Age report were established by French companies whic h cover

90 percent of the total rubber area, producing 50,017 long tons in 1966.

This represents a spectacular yield of 1,302 pounds per acre, or over

450 pound more than the Malaysian yield . The present rubber tapped

area is only 70 percent of the total planted area, whereas the untapped

30 percent represent immature areas planted 5 year s ago with high yield

14Far Eastern Economic Review,~., p. 249 .

15Rubber Age, September 1960, p. 1087.

16Rubber Development, XVIII(l965), p. 54.

17 Bugbee, ~., p. 95.

111

trees . 18

Africa and Latin America produce about 200,000 long tons a year.

But they have many problems to solve. Natural rubber supplies from

Africa will continue to increase in the next few years . Two large

American rubber manufacturers, Firestone and B. F. Goodrich, own plan-

tations in Liberia, with free technical assistance being offered to

native producers, and both new planting and replanting continuing at a

rapid rate. 19 In Latin America, the rubber produced is not sufficient

for local consumption and still faces the lack of availability of labor.

They are unwilling to stay in the areas devoted to rubber production

without high wages. Moreover, the inability to control leaf blight

was a principal deterrent to plantation rubber. 20 Today, there are six

rubber companies {Firestone, Goodyear, Pirelli, Brasiliera de Borracha,

Dunlop, and General Tire), involved in rubber plantations in Brazil,

after the government decreed support of rubber plantations in 1952. The

other, Goodyear , has been establishing rubber plantations in Southwestern

Guatemala since 1957 . 21 It will be several yea rs before the success

of the program is known .

18 Rubber Age, April, 1967, p . 139.

19 Phillip,~. , p. 154-155 .

20 D. M. Phe l ps, Rubber Development in Latin America (Ann Arbor,

Michigan: University of Michigan Press, 195 7), pp. 169 - 170.

21 Phillip,~ - , pp. 155-156.

112

Thailand's Rubbe r Replant i ng Scheme22

It is generall y acce pted that rubbe r trees need about seven years

after the planting o f a rubbe r gr ove be fo r e the trees are sufficiently

mature for tapping . Ther eafte r its yiel d increases rapidly after the

first tapping until it reaches it s peak between the fourteenth and

seventeenth year. The maximum yi e ld of latex is attained in about 12

years . At 30 or 35 years , the re is declining yield and losses fro m

disease and the economic life of rubbe r trees . From then on , the tree

will not be worth tapping and will eventually produce nothing. 23

Thus it is clear that a rubber plantation must be periodical l y

renewed. It is generally accepted that t he whole stand should be

replanted approKimately every 30 years. If 3 percent of the trees

are replanted each year, the r enewal of the planted area will be completed

in roughly 31 years. Adding the period before the most recently planted

trees can be tapped, the tree will r enew its capital in about 40 years.

Then , at any one time, 21 percent of the planted area should be imma-

ture. The productive trees must carry the acr eage of immatur e rub be r

as well as the other plantation costs. In this case, if a plantation

postpones replanting until many of its trees approach the end of their

economic life , the revenue from the latter will not be enough to cover

all expenses , since much of the planta tion may be planted with immature,

non-yie lding trees .

23 Perey W. Bidwell , Raw Material : A Study of American Policy

(New York: Harper & Brothers, 1958), p. 266 , note 20 .

113

In Thailand, as discussed before, where almost the entire produc ­

tion of natural rubber is in the hands of the small holders, there are

about 1.8 million acres of rubber planted area. From the total rubber

planted area, 400,000 acres are immature . Of the remaining 1.4 million

acres, it is es timated that 600,000 acres are prewar stock and 800,000

acres are growing too old.24 In 1958 the IBRD recommended procedures

of replanting similar t o those followed in Malaya and Ceylon. In

addition, the World Bank strongly suggested that the essential element

of the rubber program should be to stimulate planting of new rubber

areas by smallholders. 25

After a long delay, the Thai government has finally decided to

carry out the rubber promotion program. She has enacted the Rubber

Planting Aid Fund, 1960, by imposing a cess tax of 2-5 1/2 cents a pound

depending on the grad e and export price of the smoked shee t s . These

exports will be used to finance the dissemination of the high-yielding

varieties for new planting. 26

The principal objec tive of the project is to collect contributions

from rubber exporters at a certain rate and place them in a central

fund. Subsidies are then given out of this fund to rubber growers who

possess old indigenous rubber trees and are will ing to cooperate with

the program. The subsidies are used to clear away the old trees and

replace them with high yielding clones. By this method, rubber growers

24Petchara Chantara, ~ . • p. 12.

25IBRD, ~., pp . 69-73.

26 Swang Kulthongkum, ~ . • p. 31.

114

will be able to r educe the cost of produc ti on in the fu ture and can

compete with synthetic rubber in the world market .

The Aid Fund Committee is responsible fo r executing the program,

approving the amount of each subsidy, and providing cash and/ or

materia l s (all t ogether no t exceeding $250 per acre) for the rubbe r

growe r who si gns a contract with the or ganization . Pa yment wil l be

made in six installment s within a period of five years after the rubber

growers f ulfill the provision of the fund step by step .

The allocation of this fund is as fo llows: 90 pe rcent for the

subsidies , 5 percent for the cost of administration, and the remaining

5 pe r cent for the cost of r esearch.

Since 1961 , the beginning of the ye ar of the replanting program

until 1964, 77,375 acres have been granted to replant the high yielding

clones. Only 56,678 acres have been r e port ed as planted. I f the r e -

planting scheme is in progress at the present moment, the completed

program should take about 25 years ( see Table 31). According t o recent

in fo rmation from 1961 to February 1967, about 96,000 acres were gran t ed

fo r r e planting with high yielding varie ties. The growers have had

replanted 72,000 acres, the rest will be in progress in the coming

planting season. The t ota l amount of cess tax, $25 million, were

co llected and $21 million have been appropriated . It is estimated that

for the year 1967 22,400 acres have been reported in applying for

r eplanting. The fund, amounting t o $5.5 mil liqn, ·will be used fo r 1967. 27

27The Rubber Replanting Aid Fund Office , Occupation on Thailand's

Soi l: Rubber Replanting with High-Yielding Varieties (Bangkok , 1967), p. 4. (mimeographed)

This material was presented in a televis i on pr ogram at Bangkok, Apr il 15, 1967. It was a conversation between Dr . Swang Kulthongkum,

115

Table 31. Thailand's replanting area, 1961-1964

Area grant ed Re2lant ing area Year Unit Acres Unit Acres

1961 1,868 14,840 1,314 9,796

1962 8,312 33,328 7,130 27,857

1963 2,040 12,738 1,635 9,516

1964 ~l 16 469 2 551 9 509

Total 16 ,511 77,375 12,630 56,678

Source : Rubber Planting Aid Fund News, Vol. 4, No. l (January. 1966), pp. 3-4.

The fO llowing problems have been encountered in connection with

this project:

l. Problem of subsidy . The fund for this subsidy came originally

from the rubber exporters, and the amount of export cannot be accurately

forecast . It depends on the international selling price of rubber,

which is always fluctuating. The contribution will thus vary according

to the fluctuation of the selling price of rubber. If the subsidy

appears to be inadequate in l ean years, there is less hope of enough

aid from the government budget or other outside sources , and the program

will be delayed accordingly. The price of rubber has generally declined,

which aggravates the situation.

2. Co- ordination of rubber growers. This is no provision forcing

the rubber growers t o adopt the official technical methods of improving

Deputy Undersecretary of the Ministry of Agriculture and Mr. Chup Muniganonta, Director of the Rubber Replanting Aid Fund Office.

116

their rubber plantations. The method being used is persuasion and not

coercion. It is a r ecognized fact that people tend to resist change . 28

3. Rubber tree cutting. The rubber growers are r eluctant to cut

down their old rubber trees and replace them with trees of high-yielding

varieties. Most rubber growers have smallholdings and would be unable

to survive during the replanting period, 6-7 years. ~n fact, $250 per

acre for replanting is not covered . The government has insisted on

the various methods such as rotating the rubber area for replanting and

growing the other crops during the waiting period, etc.

4. Lack of skill and technical knowledge. In general, most rubber

growers lack skill and technical knowhow. The Department of Agriculture

and the Rubber Planting Aid Fund Office have to work closely together

in i nstituting effective traini ng programs .

Outlook for the Future of Natural Rubber

The long run outlook for natural rubber vis -a-vis synthetic rubber

is in doubt; the short run outlook is not.29

In the United States, a

ceiling on domestic imports of natural rubber seems t o have been estab-

lished by the growth of the American synthetic rubber industry. A change

in domestic consumption patterns, however, does not pose an immediate

threat to the continued expansion and prosperity of the natural rubber

growing industry. Because the annual consumpt i on of the United States

is always around 500,000 tons, it still holds the position of leader of

28Rubber Replanting Aid Fund News, Vol. 3, No. 1, (January, 1965), pp . 5-11.

29Phillip, ~., p. 167 .

117

the natural rubber consuming countries .

Outside of the United States and Sovie t Russia, the use of

synthet i c r ubber, in spite of r ecent gains, has not attained large

volume (see Chapter III). And although the syn thetic rubber production

capaci ty of these countries are increasing, world production has not

reached a significan t l eve l . Many for e ign manufacturers of tires and

other rubber products, e xce pt those a ffil iated wi th American companies,

s till lack chemical e ngineers who know how t o use synthetic rubber. 30

With natur al rubber supplies not expected t o increase s igni f i can tl y

un t il the 1970's, it seems certain that ample markets will be available

for all of the crude rubber that is produced.

For the expansion of natural rubber production due to begin in

the 1970 ' s, markets will have to be found largely outside the United

States and Canada. The world consumption of rubber has been steadily

increasing s ince the end of Wor ld War II. Countries outsid e the United

States raised their consumpt ion of rubber f r om 328 , 500 t ons i n 1945 to

an es tima t ed 3,468,300 t ons in 1966 . Of the latter, nearly 2 million

t ons were natural r ubber and onl y 1.5 million tons were synthetic.

Measured by American standards, foreign per capita consumption is s till

low. Table 32 shows 1964 usage of rubber in leading consuming countries .

Assuming freedom from major inte rnal disturbances and continued growth

in nationa l income in these major developed countries, foreign rubber

consumption will continue t o rise , particularly in the European Common

market and Japan; and in the virtually untapped markets of Afr ica, China,

30Ibid .

118

Table 32. Rubber consumption per caput in 1964, for various countries (in pounds)

Total rubber Natural rubber Synthetic rubber Natural rubber consumption consumption consumption as percentage

Countrz per caput per caput per caput of total

United States 22.66 5.64 17.02 25

Canada 15.77 4 . 51 11.26 30

Austral ia 14.65 7.63 7.02 52

United Kingdom 13.63 7.19 6.44 53

West Germany 13.09 6.11 6.98 47

France 12 . 46 5.89 6 . 57 47

Eastern Europe (incl. U.S.S.R.) 8.66 2.07 6.59 24

Japan 8 . 38 4.69 3.69 56

Italy 7 . 65 3.52 4.13 46

Ne therlands 7.40 4.01 3 . 39 54

Brazi l 2 . 02 0 . 90 1.12 44

China (Mainland) 0.42 0 . 42 100

India 0.35 0.29 0 . 06 81

Source: United Nations Conference on Trade and Development, TD/B/AC . 2/4, 4 January, 1966, p . 81.

India, and South America. Tremendous growth possibilities s ti l l

remain for the natural rubber growing industry if it can inc r ease its

production ef ficie ncy through be tter land util ization, and maintain

a fair l y stable pr ice for its product.

119

Estimate of Natural Rubber Consumption

Projecting current consumption patterns into the future is always

a speculative venture. Nevertheless, a review of various studies of

future rubber demand may be helpful in assessing the competitive position

of natural and synthetic rubbers.

Below are shown F .A.O. projections for 1970, 31 Mrs. 't Hooft Welvaars'

estimated for UNCTAD, 32 and International Study Group estimate for

UNCTAD. 33

F . A.O. estimate (1964) for 1970

Exclude Centrally Planned Countries

Mrs. 't Hoeft \</elvaars ' estimate (1964)

for 1970, excluding Centrally Planned

Countries

l.R .S. G. estimate (1965) for 1970

Exclude Centrally Planned Countries .

7.15 -8.47 million long tons

5.17-5.83 million long tons

6. 16 million long tons

6.60 million long tons

6 .03 mi ll ion long tons

Estimates for 1970 of the world rubber consumption differ consid-

erably . For convenience in making these estimates , it is useful to

eliminate the centrally planned countries, for which data are a matter

of conjecture.

According to Mrs. 't Hooft Welvaars' es timate, from 1954-1964,

exc lusive of centrally planned countries, there was an average yearly

growth rate of 6.37 percent. From 1959-1964 the average growth rate was

3lF.A. O. (CCP 64/6 I-III),~., p. II, 102-104.

32UNCTAD, TD/B/AC . 2/4 ' .2..E..:.....£l., pp. 36-38 .

33UNCTAD , TD/B/C. 1/20, ~., pp. 1-2.

120

7.3 percent. In fact, the growth of total demand for rubber is

dependent on the absolute l evel of national income of any one country

and on the rate of growth of G. N. P. Thus the faster growth between

1960 and 1964 seemed to result from the persistent boom in the U.S . A.

and the European Common Market countries . It should be remembered that

for the world as a who l e the calculated rate of gr owth of consumption

between 1959- 1964 slowed down as compared to the consumption in the

centrally planned economies .

World consumption, exclusive of centrally planned countries, has

been growing by 6.37 percent fr om 1954-1964, and by 7.3 percent from

1959- 1964. Mrs. Welvaars extrapolated the 1964 consumption figure

at an annual growth rate of 6.25 percent a year. This would bring

overall consumption in the Free World to 6.16 mil lion l ong tons in 1970.

The highest F . A.O. es timate of 5.83 million tons would mean an

average yearly growth rate of 5.5 percent since 1960, and of 4.5 percent

since 1964. The F.A.O. estimate will be assumed t o be a reasonably

conservative estimate of world demand for rubber in 1970 (excluding

centrally planned economies).

In the F.A.C. projection for 1970, eliminating centrally planned

economies, the percentage usage of natural rubber is estimated at 37

percent and 41 percent . Thus, the estimated consumpti on of natural

rubber, excluding the centrally planned countries, will be between 2.18

and 2.39 million tons. The F.A.O . 1970 es timate of natural rubber con­

sump tion of centrally planned economies varies between 0 . 31 and 0.69

million tons. Added to the r es t of the world, the F.A. O. es timate for

1970 amounts to a total wor ld consumption of natural r ubber of be tween

2 . 48 to 3.08 million tons.

121

Mrs. 't Hoeft Welvaars' view that the percent usage of na tural

rubbe r is 37 percent and 41 percent seems t oo high. Since 1964 th e

natural rubber percentage usage for this part of the world was alread y

down to 40 percent. It is more likely that in the near fut ure the

natural rubber percentage of the total rubber consumption wo uld lie

between 25 percent and 35 percent. She used 35 percent as t he natural

rubber share in total r ubber consumption . A 35 percent usage of

natural rubbe r in 1970 would then amount to 2 . 16 million long tons of

natural rubber. Adding t he F . A.O . estima t es fo r the cent r ally planned

economies , total consumption of natural rubber might be be tween 2.47

and 2. 85 million long tons.

The International Rubber Stud y Group considered the prospects for

natural and syn the tic rubber consumption up to 1975 . The Working Party

had the benefit of the views of most of the main consuming countries,

and in particular es timates for 1970 and 1975. Table 33 summarizes

the group ' s informed judgment of the probab l e consumption in 1970 and

1975. 34

The Working Party had s tudied the actua l world consumption of

various countries for the period 1960-1965 and fo llowed with the es ti­

mates for 1970 and 1975 of consumption and the natural rubbe r percentage .

It will be seen that world consumption , exc luding Eastern Europe and

Mainland China, is expected to be of the order of 6 , 025,000 l ong tons

i n 1970 and 7 ,500,000 long t ons in 1975 , with Eastern Europe and Main­

land China importing a total of 575,000 l ong tons of natural rubber in

34Ibid ., p. 1.

122

Table 33. Natural and synthetic rubber consumption and percentage consumption of natural rubber in 1970 and 1975 (in l ong tons)

1970 ConsumEtion {,000) NR

Country NR SR Total %

United States 575 1,820 2,395 24

Wester n Euro2e United Kingdom 187 238 425 44 France 116 216 332 35 F. R. of Germany 157 293 450 35 Italy 97 158 255 38 Netherlands 22 33 55 40 Others 205 260 465 44 Total Western Europe 784 1 , 198 1, 982 40 Australia 38 57 95 40 Brazil 39 7l 110 35 Canada 44 141 185 24 India 84 61 145 58 Japan 23 1 347 578 40 Others 297 233 530 50 Total Rest of Worlda 733 910 1 643 45 Tota l World (rounded)a 2 ,1 00 3 , 925 6 , 025 35 u.s . s . R. b 250 250 Other Eastern Europeb 125 125 Main l and Chinab 200 200 Tota l lo/orld 2 , 675 3 , 925 6 , 600

Sou r ce : Uni ted Nations Confer ence on Trade and 1/20 , 28 June, 1966, p. 19.

aExcludi ng Eastern Eu r ope and Main l and China .

blmpor ts of natural rubber.

1975 ConsumEtion { z 000)

NR SR Total

560 2 , 240 2, 800

180 320 500 127 298 425 165 360 525 109 221 330

22 48 70 214 381 595 817 1 , 628 2, 445 40 75 115 42 98 140 48 182 230

100 100 200 269 545 814 394 346 740 893 1 346 2 239

2 , 275 5 , 225 7 , 500 300 300 125 125 250 250

2, 950 5 , 225 8 , 175

Developmen t, TD/B/C.

N. B. Estimates of future consumption must always be subject t o a marg in of error and the above figures reflect a n estimated or der of magni t ude . The margin of error for 1970 should be less than fo r 1975. Howeve r , due to the inadequacy of the data available the margin of error fo r Eastern Europe and Ma inland China wi ll be ver y much wider , and the Work i ng Par t y consider ed tha t import s of natura l r ubber in 1970 and 1975 could be wi th in the fol l owing r anges:

U.S . S. R. Other Eastern Europe Ma i nland China

1970 225 - 275 100- 150 175- 225 500- 65 0

1975 250- 350 100- 150 200- 300 550-800

NR %

20

36 30 31 33 32 36 33 35 30 21 50 33 53 40 30

123

1970 and 675,000 long tons in 1975.

The estimates of the percentage of natural rubber to total world

rubber consumption assume, for the purpose of estimating, that there

will be no significant change in the competi tive relation between

natural and general purpose synthetic rubber. The estimat e of natural

rubber percentage of the total rubber consump tion are 35 percent in

1970 and 30 percent in 1975.

The 35 percent usage of natural rubber in the Free World in 1970

would then amount to 2,100,000 long tons of natural rubber in 1970

and 2,275,000 long tons in 1975 . To this should be added the estimate

importation of centrally planned economies natural rubber up t o 575,000

l ong tons in 1970 and 675,000 long tons in 1975 . The total consumption

of natural rubber might then be 2,675,000 long tons in 1970 and 2,950,000

long tons in 1975 (see Table 33).

Estimate of Natural Rubber Production35

Table 34 shows the world production of natural rubber during the

four years, 1962-1965, and the production of most countries.

According toW. G. G. Kellett, the principal estimates reveal that:

The estimate for world production of natural rubbe r for the year 1965 to 1975 inc lu sive shou l d not be interpreted as indicating the amounts woich wi ll actual l y be produced in these years. They are attempts to measure, ignoring al l out­side influences including po lit ical circumstances, the amount s which could be produced by all those producers --estates and smallholders --who normally produce natural rubber . They do not take into consideration the effec ts of price on output, particularly smallholders ' ou tput, and exclude production from

35This part is heavy based on the study of Mr. W. G. G. Kellett who

was invited by the Working Part y of I.R.S. G. , Ibid., pp . 2-3 .

Table 34 . Natural rubber actual supply 1962-1965 and potential supply in 1970 and 1975 (in thousand long tons)

Actual Estimated E:Dtential Country 1962 1963 1964 1965 1970 1975

States of Malays Estates 439 459 478 481 575-625 700-750 Sma11holdings 312 329 347 380 425 - 475 550-600

Total 75 1 788 825 861 1,000- 1,100 1,250-1,350 Sa bah 22 21 23 24 35-40 50-60 Sar awak 44 45 45 40 45 45 Total Ma laysia 817 845 893 925 080-1 185 345-1 455 Indonesia

Es t ated 206 205 219 240- 250 250-275 Smallholdings 465 368 419 584 - 495 500-525

Total 671 573 638 690 725 - 745 750-800 Thailand 192 187 218 213 240- 260 280- 300 Ceylon 102 103 110 116 135-145 155-165 Vie tnam 74 71 73 61 85-95 100 - 110 Cambodia 41 40 45 48 60- 70 70-80 India 31 37 44 49 60- 70 75-85 Burma 12 12 12 12 10 10 Other Asia and Oceania 11 12 12 13 20 20 Li beria 45 40 42 48 55-65 70-80 Nigeria 59 63 72 69 95-105 110- 120 Cameroon 8 9 9 10 15 20 Congo 37 37 33 20 40- 50 60- 70 Other Africa 1 2 3 3 10 15 Brazil 21 20 28 29 30 35 Other Latin America 7 7 7 7 10 10 Total Production 2 125 2 075 2 250 325 2 67 5- 2 875 3 125-3 375

Source: Uni ted Nations Conference on Trade and Development , TD/B/C. 1/20, 28 June, 1966, p. 20 . >-' N ..,..

certain smallholders in Indonesia and Sarawak which has been forthcoming in the past during periods of exceptionall y high prices.

The es timates have been constructed where possible by making use of acreages and yield data but in some instance the acreage data is so out-of-da te that the assumption which had to be made detract from the value of the estimates. The estimates made all territories in the later years of the period are of course based on certain assumptions regarding future annual rates of planting.36

125

The estimate for natural rubber potential production capacity which

presented by the International Rubber Study Group for 1970 and 1975 is

shown in Table 33. It gives a range of potential production capacity

of 2,675,000-2,875,000 long tons for 1970 and a range of 3,125,000-

3,375,000 long tons for 1975.

The Estimated Supply and Demand Position

The summarized estimates for the consumption and potential supply

of natural rubber in 1970 and 1975 are shown below.

Import into Eastern Europe and Mainland China

Consumption in the rest of the world

Potential supply of natura l rubber

(in thousand tons) 1970 1975

575 675

2 100 275

675 2 950

2 , 675 - 2,875 3,125 - 3,375

It may be noted that the above es timates do no t take account of any

increase of natural rubber stocks. Assuming normal relationship being

maintained between consumption and total stock, the increased consumption

of natural rubber between 1965-1975 would require the addition of some

250,000 long t ons to world stocks, or in other wo r ds, some 25,000 long

36Ibid., pp. 2-3.

126

tons a year. 37

Proposed So lutions to the Problem

At various times and in various forums proposals have been made

to improve the economic position of those deve loping countries large ly

dependent on commodit y trad e . As discus sed before , the f undamental

problems f acing natural rubber was it s long t e rm prospec t s and not short

term price f luctuation. The r e seemed no doub t that ther e wou ld be signi­

ficant surplu s capacit y fo r general purpose synthetic rubber throughout

the period up t o 1975. This would mean a continuation of the downward

pressure on both natural and synthetic rubber prices and in consequence

the probability of a slow bu t limited decline in prices. 38 In addition,

there was the danger that a significan t surplus productive capacity fo r

natura l rubber mi ght develop before 1975. In the circumstances under

which natural rubber is traded, i t is likely to create a much more immed -

iate and seve re pressure on prices than in the case of the syn the tic

sur plus capacity. The pros pedt would then be for a fall in price, which

might well be followed by reductions in t he prices of the competing

synthetic rubbers. There might, therefore, be a period of sever e com-

petition at low prices .

The main proposa l mad e here fo l lows Mrs. 't Hooft Welvaars in her

valuable and stimulating paper " International Organization of Commodity

37 Ibid., p. 4.

JBUNCTAD, TD/ B/ AC . 2/4, ~. , pp. 39-45.

127

Trade with r espec t to Natural Rubber."39 She recommends:

1. I~proving the eff icienc y of the natural rubber industry by:

a. Increasing the amount of agronomic and fundamental r esearch

which at present goes into improving the quality and

yi e lds of the rubber trees. Researchers in the field

constantly complain of lack of funds.

b. Disseminating the result of this research among estates

and smallholders, and putting new techniques into effect .

This might entail a good network of government-appointed

agronomic consultants in rubber gorwing areas. Pilot

projects might be needed to overcome the normal peasant

conser vatism. Financial incentives might also be needed.

c. Drawing up a co-ordinated replanting program in each country

and putting it into effec t. One of the most important

ways of continuousl y reducing production costs is steady

replanting .

2. Improving the technical qualities of natural rubber in order to

increase the demand for natural rubber. Most consumers of natural rubber

stress th e importance of:

a . Simplification of the grading system .

b. Better control of clean l iness and uni formi ty.

c . Improved methods of packing and presentation.

3. Stimulating the demand for natural rubber by:

39~ .• pp. 49-76 .

128

a. Removing obs tacl es to trade in technically improved natural

rubber. An important element would be the elimina tion or

reduction of the wall of import duties in both developed

and developing countries for rubber products.

b . Providing natural rubber consumer services in importing

countries. Thes e services could take advantage of techni­

cal progress in manufacturing industries which might lead

to new techniques and new applications.

c . Supplying information which is in the interest of both

natural rubber and synthetic rubber producing coun t ries .

With sufficient information one might estimate the future

cost price of natural rubber. This might act as a check

on undue expansion synthetic rubber production.

d. Promoting cooperation between natural rubber and syn thetic

rubber producers in trying to increase overall demand,

through research into finding new uses of rubber.

4. Diversification. If through replanting and new planting rubber

trees ther e was a clear danger of excessive natural rubber production

capacity developing then diversifying into othe r crops would require

consideration. Diversification in its broadest sense can also include

the development of the industrial sector in a country primarily depen­

dent on its a griculture .

5 . During the interim adjustment period, natural rubber pr oducing

count ries might need:

a. Compensatory fi nance to provide some temporary assistance

to natural rubber producers if the price of natural rubber

129

would fall significantly.

b. Long-term contract s of a bilateral or multilateral charac­

t er . These cou l d ass ure a more stab l e return for some

part of the supply, at l eas t ove r the period of the contract.

CHAPTER VII

SUMMARY AND CONCLUSION

An entire ly new factor ent ered rubbe r t rade afte r World War II in

the shpe of compe titi on from syn thetic rubber. The appearance and

success of synthetic produc ts have drastically changed the supply and

demand condit i ons of the whol e rubber marke t. On the supply side, more

f lexibility has been i nt roduced by synthetic rubber's quicker response to

demand change; no rubber tree can be tapped earlie r than seven yea rs

after it ha s been planted . On the demand side, natural rubber has l os t

its monopo l y position in many uses and growing substitutabili t y has

increased th e price elastici t y of demand. This substitutability will

increase sharp l y with the deve l opment of stereo r egular rubber, which

can replace the natural product in many uses in which the ear lier

synthe tic could not.

Natural rubber prices have been subjec t t o considerable f luc tua­

tions. This appears to be due to the fact that it is no t usually

possi bl e for manufacturers to shift frequently between one kind of

rubb er or mixture of rubbers t o another . They tend to subs titut e on

price grounds on l y when price di fferences are expected to last for some­

time. Howeve r, in the sixties , price certainly became a more prominent

fac t or in the demand for natural rubbe r than it had ever been before.

The United States has been t raditionally the larges t cons ume r of

natural rubber; in recent years it has become a leading produce r of

synthetic rubbe r and thus threatens t o become l ost as a market for the

131

products of the rubber plantations of Asia. Such a tremendous disloca­

tion of the natural rubber market poses especially difficult problems

for Thailand and other rubber producing countr i es which are in large

measure dependent upon rubber exports for their domestic economic

prosperity.

A stud y of the natural rubber industry shows that th e si tuation

it faces is not so much one of immediate surv ival as it is a question

of its future position in the world market. In fact, natural rubber

is a growing industry. The decline of the natural rubber industry has

not been an absolute one, but relative. Natural rubber is facing a

declining share of the market rather than decreasing output. For

example, according t o figures issues by the International Rubber Study

Group, world production of natural rubber was 1,918,000 l ong t ons in

1955, 1,990,000 long tons in 1960, and 2,408,000 long tons in 1966.

But its share in world rubber production was r educed from 63.9 percent

to 51.4 and 42 . 0 percent, respectively .

Since the demand for natural rubber is almost completely dependent

on the manufacture of tires and tubes for motor vehicles, and on the

absorption of rubber in other manufactured goods , the fluc tuations of

the natural rubbe r trade has been very closely associated with changes

in industrial act i vities, particularly the automotive industries . Thus,

the primary economic problem has been the transmission of trade cycles

from the United States and the other developed countries t o rubber

producing countries. Under thi s condition, changes in the United States'

and European industrial coun t ries' demand for natural rubber has exer­

cised a vital role in determining the price movement, instead of the

opposite being true. This means that in the fu ture a change in the

132

price of natural rubbe r will have littl e impact on the amount of rubber

used in automobile product ion because rubber is only a small fract i on

of the price of an automobile. Shou ld natural prices at any time have

a significant influence on the price of an automobile, synthetic rubber

might be substituted for it . IRSG has reported that a rise of some 3.5

cents (3 pence) a pound fo r natural rubber wou ld pr ovid e an incentive

fo r a 5-1 0 percent substitution of natural rubber by synthe t ic rubber

in automobile tires. 1

The vulnerable position of the natural rub ber industry could have

been less severe than it has been if the inheren t inflexibility in the

structure of natural rubber supply were absent f r om the industry. Be -

cause of relatively stable rubber prices, es tat e producer can mor e ade-

quately plan capi t a l inves tment and develo p more comprehensive l ong

range labor policies, which will ensure a more efficien t u t ilization of

the labor force. On the other hand the sma l lholders, t o whom no alter-

native means of livelihood are available, not on l y continue to tap, but

also accelera te tapping in their efforts to maintain a subsistence

level of income .

In the c ompe titive market, syn thetic rub ber has enjoyed several

advantages over na tural rub ber. These are: availability, unique proper -

ties , technical improvement, and lower and mo re stable prices . But in

the f i e ld of gene r a l properties , natural rubber still hold s t he pre fe r ence .

In t he eyes of indus tria l consume r s, the pr ice stability and quality of

rubber ar e important fac t ors t o be conside r ed in the ir choice. Up t o

1UNCTAD, TD/B/C. 1 /20, ~. ,Appendix I, pp. 3-4 .

133

the present time, these advantages have been offer ed only by synthetic

rubbe r. Efforts t o improve the qualities and lower the cost of product ion

of natural rubber, which have already begun, will be stepped up.

According to es timates made by the IRSG, all natural rubber pro -

duced dur i ng the years t o 1970 will be so ld . Synthetic rubber will be

used to mee t excess demand fo r new rubber during their period (see pp.

119-126) . Obviously, for the past several years , excess demand has been

increasing at a fas t e r rate than natural rubber production. Howev e r,

the outlook f or natural rubbe r s till l ooks good . Proj ec tions s how

that in 1975 some surplus of natural rubber production will occur. But

the natural rubber industry ' s future depends t o a large degree on lowered

costs of production with replanting and new planting with high-yielding

trees, and improving it s quality and marke ting.

The f uture of the natural rubber industry is no t entirely bleak.

Natural rubber has a definite f uture . Mr. J ohn McGavack wrote:

It is well es tablished at the present time in the e lastome r field that about 30 percent of the pro­duction requires natural rubber r egardless of cost, and about 30 percent requires the synthe tic type . The bal­ance, or 40 percent of the production, can use e ither de pending upon its cost . This percentage holds even if the newer synthetic t ypes which are quite similar t o natural rubber are taken into consideration . 2

P. C. Rat chaga came to a similar conc lusi on:

Natural rubber will always find a market, as wor ld demand for new rubber is increasing because of fur ther deve l opment of present us es for rubber, discoveries of new uses for rubber and the opening up of new markets f or rubber . 3

~cGavack, ~., p. 789.

3 Ratchaga, ~., p. 46.

134

Thailand' s rubber industry depends on the world rubber market situa­

tion. Since World War II, the production of natural rubber has increased

s t eadil y from 52,000 l ong tons in 1947 t o the peak of 218,000 long t ons

in 1964. At pr esent the government of Thailand is busy promoting the

r e planting scheme which has been activated since 1961. Various polic i es

in improving the qualities of rubber and capacity of the tree are be ing

introduced. The gove rnment plans t o r eplant wi t h high- yie lding varie ­

ties up t o 400,000 acres within the next seven years before the price of

wor ld natural rubber dec lines . At that time Thailand would produce the

same as the present l evel of production, 200,000- 250,000 long t ons, so

that s he can maintain her economy at l east at t oda y ' s standard of employ­

ment and income .4

In fac t, natural rubber must continue to be an important s ource

of foreign exchange . Despite the expansion of industry and othe r cro ps,

natural rubber is still one of the best hopes of fu rthe r economic deve l op-

men t, s ince it is a ver y important source of government r evenue and

pers onal inc ome. For the next several decades rubber will be a vital

e l ement in Thailand's economic development.

The fu ture of the natural rubber indu s try of Thailand, then, depend s

first, on how fast production could be stepped up; secondly how fast the

cost of production coul d be r educed by rep l anting with high-yi e lding

clones ; and thi r d l y on t he world price of na t ura l r ubber .

In conclusion, it can be said that the i nc reasing re lative share of

man- mad e rubber in the world ' s t o tal consumption of rubber ha s been

primarily due t o the slow increase in the supply of na t ural r ubber

4 Petc hara Chantara, ~., p. 12 .

135

compared to the technological development in the other sector of the

rubber industry. The natural rubber industry, therefore, shou ld in­

crease the supply in such a way as to keep pace with the developments in

the synthetic rubber industry. The replanting scheme now being under­

taken in the natural rubber producing countries will be of advantage not

only at present but also in the future.

BIBLIOGRAPHY

General Materials

Official Publications

Food and Agriculture Organization , Commodity Rev iew--Spec ial Suppl ement: Trade in Agriculture Commod ities in the United Nations Deve lopment Decade , Vol . 1 (CCP 64/6), 1964.

International Bank for Reconstruction and Dev e lopment, The Economic Deve lopment of Malaya (Baltimore, Mary land: The Johns Hopkin s Press, 1955).

The Economic Development of Ceylon ( Baltimore , Mary­land : The Johns Hopkin s Press, 1956) .

International Mone tar y Fund, International Financial Stati stics , Washington, D.C .

Uni t ed Nations, Economic Commission for Asia and the Far East, Economic Bulletin for Asia and the Fa r East, Bangkok.

Economic Survey of Asia a nd the Far East, Bangkok.

United Nation Conferenc e on Trade and Deve l opment, The International Organization of Commodity Trade Ca se Study of Natural Rubber, TD/B/ AC. 2/ 4, 1966 .

----~~------~ · Re port of the International Rubber Study Group Working Party on the Pros pec t of Natural Rubber, TD/B/C . 1/20, 1966.

U.S . Depar t ment of Commerce, Rubber Industry of the United States, 1893-1939, pre pared by P. W. Barker for Trade Promotion Series , No. 197 (Washing t on, D.C . , 1939).

World Trade Information Service: Economic Devel opment in the Far East and Oceania, 1959, Part II, No. 60- 67 (Wa shington, D.C., 1960) .

Books

Adam, P. E., Memorandum on the Fluctuations in the Price o f Na tural Rubber (Kuala Lumper, Ma la sai : Government Printer , 1958) .

Akers , C. E., The Rubber Industry in Brazil and the Orien t (London: Methuen & Co ., 1914).

137

Ball, J. M., Reclaimed Rubber (New York: Rubber Reclaimers Association, Inc ., 1947).

Manual of Reclaimed Rubber (New York: Rubber Reclaimers Association Inc., 1956).

Bateman, L. The Chemistry and Physics of Rubber -Like Substance (London: Maclaren & Son Ltd., 1963).

Bauer, P. T., The Rubber Industry: A Study in Competition and Monopoly (London: The London School of Economic and Political Science, 1948).

Bidwell, Percy W., Raw Material: A Study of American Policy (New York: Harper & Brothers, 1958).

Browne, Edith. Rubber (London: Adam and Charles Black, 1912).

Buehr, Walter, Rubber: Na tural and Synthetic (New York: William Morrow and Company, 1964).

Clair, Colin. (London:

The Thing We Need and Where They Come from Rubber The Gawthorn Press Ltd., 1963).

Dawson , T . R. (ed.). History of the Rubber Industry (London: Institu­tion of th e Rubber Industry, 1952).

Donnithorne, Audrey G. British Rubber Manufacturing, (London: Edward Arnold Publishers Ltd., 1958).

Firestone, Harvey S . (Jr.). The Romance and Drama of the Rubber Industry (Akron, Ohio: The Firestone Tire and Rubber Company, 1936).

Gamba, Charles. Synthetic Rubber and Malaya (Singapore: Donald Moore, 1956) .

Hathaway, Dale E. Problems of Progress in the Agricultural Ec onomy (Chicago, Illinois: Scott, Foresman and Company, 1964).

Howard, Frank A. Buna Rubber: The Birth of an Industry (New York: 0. Van Nostrand Company, Inc . , 1947).

Huke, D. W. Introduction to Natural and Synthetic Rubber (London: Hutchinson & Co. Publishers Ltd. , 1961) .

Knorr, K. E. World Rubber and Its Regulation (California: Stanford University Press, 1945) .

Kindleberger, Charles P. Foreign Trade and the National Economy (New Haven, Connecticut: Yale University Pres ~, 1964).

Le Bras, Jean. Introduction to Rubber (London: Maclaren and Sons Ltd., 1965).

138

McFadyean, Andrew. The History of Rubber Regulation 1934-1943 (London: George Allen & Unwin, Ltd., 1944).

Mc Pherson, A. T. and Alexander Kiemin .. Engineering Uses of Rubber (New Yor k: Reinhold Pub li shing Corporation, 1956) .

Mill, L. A. Malaya: A Political and Economic Appraisal (Minneapo lis, Minnesota: University of Minnesota Press , 1958).

Morton, Maurice. Introduction t o Rubber Technology (New York: Re inhold Publishing Corp oration, 1959) .

Moyle, Alton . Bibliography and Collected Abstracts on Rubber Producing Plants (College Sta tion , Texa s: Texas Expe rimental Station, 1942).

Myin t, Hla. The Economic of the Deve l oping Country (New York : Frederic A. Praeger, Inc . , Publisher s , 1966).

Naunton, W. J. S. The Apply Science of Rubber (London: Edward Arnold Publi sher s , Ltd., 1961).

What Every Engineer Should Know About Rubber (London : The British Rubber Deve lopment Board, 1954).

Nourr y , A. Reclaimed Rubber: Its Deve lopment, Applications and Future (London: Maclaren & Sons Ltd., 1962).

Payne, P. L. Eng land:

Rubber and Rai l ways in the Nineteenth Century (Liverpool, Liverpool University Press, 1961).

Phillips , Charles F. (Jr.). Competition in the Synthe tic Rubber Industry (Chape l Hill, North Carolina: The University of North Caro l ina Press, 1963) .

Polhamus, Loren G. Rubber: Botany, Production , and Utilization (London : Leaonar Hill (Books) Limited, 1962) .

Sears, W. J . and Miller, Charles C. (eds . ) Natural Rubber Buying (New York : Rubber Manufacturers Association, Inc., 1953).

Silicock, T . H. and Fish, E. K. (eds.) The Political Economy of Inde pendent Malaya: A Case Study of Deve l opment (Berke ley and Los Ange l es , California: University of California Press, 1963).

Styko lt, Stefan . Economic Analysis and Combines Policy (Tor onto, Canada: University of Tronto Press , 1965).

Terry, Hubert L. I ndia Rubber and Its Manufacture (London: Archibald C. Cons table & Co., Ltd ., 1944) .

Treloar, L. R. G. The Physic of Rubber Elasticity (London: Oxford Univers it y Press, 1949) .

139

You, Man He. A Study of the Natural Rubber Industry with Special Emphasis on Its Fu tur e Prospects , Unpublished Ph.D. Dissertation (Eugene, Or egon: Unive r sity of Oregon , 1963).

War r e n, Harr y V. , and E. F. Wilks. of Change (Vancouver, Canada:

Wo rld Resource Production 50 Years Tantalus Re search Limited, 1966).

Wolf, Howa rd . The Story of Scrap Rubber (Akron, Ohio: A Schulman, 1943).

Woodruff, William. The Rise of t he British Rubber Industry During the Nine t eenth Century (Liverpool, England: Liverpoo l University Press, 1958).

Woytinsky, W. S. and S . E. Woytinsky . World Population and Production (New York: Twnetieth Century Fund, 1953).

Periodicals

Abraham, P . D. and R. S. Tayler. "S timulation of Latex Flow in Hevea Brasiliensis, " Experime ntal Agriculture, III(l967), pp. l - 12 .

Arnold, Richard A. "The World Outlook for Stereo Homopolymer Rubber ," Rubbe r Age, 98(1966), pp. 65 - 70 .

Bloor, W. F . "Pos twar Rubber Ind ustry Capacities and Implications ," The Journal of Marketing , X(l945-l946), pp. 279-281.

Caldwell, S. M. "Scientific Contributions to t he Rubbe r Indu s try ," Rubbe r World, 145(1957), pp. 255- 260.

Chan Kwong Wah, Francis . "A Preliminary Study of the Supply Respons e of Malayan Rubber Estates Be t ween 1948-1950," The Malayan Economic Review, VII(l962), pp. 77 -94.

Chi s holm, John K. "Can Rubber Restriction Succeed?" Harvard Business Review, XIII(l934-1935) pp. 475-482.

Far Eastern Economic Review, Singa pore .

Hotchkiss, H. Stuart. "The. Evolution of the World Rubber Situation," Harvard Business Review, 11(1924), pp. 129-138.

Howard, Frank A. "Synth e tic Rubbe r," Harvard Business Review, XX (1941-1942) pp. l-9.

Knorr, Klaus E. "World Rubbe r Problem, " Harvard Busines s Review, XXIV, pp. 394-404 .

Lim Chong Yah. ' 'Malayan Rubber Replanting Taxes," The Malayan Ec onomic Rev i ew , VI(l961), pp. 43-52.

140

McHale, T. R. "The Competition Between Synthetic and Natural Rubber," The Malayan Economic Review, VI(l961), pp. 23-31.

"Changing Technology and Shifts in the Supply and Demand for Rubber, An Analytical History, 11 The Malayan Economic Review, IX(l964), pp. 24-48.

McGavack, John. "The Future of Natural Rubber, " Rubber Age, 84(1959), pp. 789-794.

Olmsted , Fred. "Rubber in the 1967 Automobile, " Rubber Age, 98(1966), pp. 65-70.

Orton , t.Jilliam. "Rubber: A Case Study," The American Economic Review, XVII(l927), pp. 617-635.

Penny, D. H. and M. Zulkifli. "Estates and Smallholding: Economic · Comparison," Journal of Farm Economic s , 45(1963), pp. 1017-1021.

Phillips, Charles F. (Jr . ) "Market Performance in the Synthetic Rubber Industry," Journal of Industrial Economics, IX(l960-19 61) , pp . 132- 150 .

"The Competitive Potential of Synthetic Rubber, " Land Economics, 36(1960), pp . 322-332 .

"Workable Competition in t he Synthetic Rubber Industry," Southern Economic J ournal , 28 ( 1961- 1962), pp. 154-162 .

Rubber Age, Rubber Trade Association, New Yor k .

Rubber Development, The Natural Rubber Producers ' Research Association, London.

Rubber Statistical Bulletin, International Rubber Stud y Group, London.

Rubber World, New York .

Ratchaga, P. C. "The Future of Malay ' s Natural Rubber ," Malayan Economic ~. 1(1956) , pp. 42-47.

Semegen, Ste phen T. "Natural Rubber: Progress and Prognostication a t the Mid-Decade , " Rubber World, 154(1 966 ), pp . 75-77.

Solo, Robert. "The Sa l e of the Syn t hetic Rubbe r Plants," Journal of Indu strial Economics II(l953-1954), pp. 32-43 .

"The New Threat of Synthetic to Natural Rubber," Southern Economic Journal, XXII(1955-1956), pp. 55 - 64.

"Research and Development in the Synthetic Rubber ," The Quarterly Journal of Economics, 68(1954), pp . 61-82.

141

Stern, Robert M. "The Export Tax on Malayan Rubber Problems and Policy ," National Tax Journal, XVI(l963), pp . 81- 88.

· ~alayan Rubber Production, Inventory Holdings and the Elasticity of Export Supply," Southern Economic Journal, 31 (1964-1965), pp. 314-323 .

Wendt, Paul. "The Control of Rubber in World War II," Southern Economic ~. XIII(l946-1947), pp. 203- 227.

Whittlesey, Charles R. "The Stevenson Plan: Some Conclusion and Observation," The J ournal of Political Economy, 39(1931), pp . 506-525.

1./ood, Ralph C. "The Control of Rubber: A Case Stud y, " The J ournal of Marketing, VII(l942-1943), pp. 99-106 .

1./oodruff, William. "Growth of the Rubber Industry of Great Britain and the United States," The Journal of Economic History, XV(l955), pp. 3~6-391.

Commodity Yearbook, Commodity Research Bureau, Inc., New York.

Encyclopaed i a Britannica, 1965, pp. 602 - 610D .

Encyclopaedia Americana, 1963, pp. 739-746.

Materials on Thailand

Official Publications

Bank of Thailand, Monthly Economic Report, Bangkok.

Annual Economic Report, Bangkok .

Rubber Situation in Thailand, 1957 and 1961, Bangkok, 1962. (Mimeographed)

Department of Agriculture, Para Rubber, Bangkok, 1965. (Mimeographed)

Para Rubber Improvement Project, Bangkok, 1965, (mimeo -graphed)

Future of Natural Rubber Situation and Rubber Plantation Development, prepared by Ratana Petchara Chantara, Bangkok, 1966. (Mimeographed)

142

Food and Agricultural Organization, Report of the F.A.O . Mission for Siam, Rome, 1948.

International Bank for Reconstruction and Development, A Public Develop­ment Program for Thailand (Baltimore, Maryland: The Johns Hopkins Press, 1959).

Ministry of Agriculture, A Statistical Review of Thai Agriculture , 1954, Bangkok, 1956.

Off ice of the National Economic Development Board , Economic Condition of Thailand (Annually), Bangkok .

Government of Thailand: The National Economic Development Plan, 1961-1966 (Second Phase: 1964-1966), Bangkok, 1964.

Southern Region Development Program, 1964-1966, Bangkok, 1964,

National Income, Bangkok , 1963.

Capital Formation in Thai land During 1957-1962, Bangkok . 1962.

Office of the Prime Minister, Thailand Official Yearbook, 1964 (Bangkok: Government House Printing Office, 1965).

Rubber Replanting Aid Fund Office , Occupation on Thailand's Soil: Rubber Replanting with High-Yielding Varie ti es , Bangkok, 1967 , (Mimeographed)

Rubber Replanting Aid Fund News, Bangkok.

Thamasat University, Public Administration Faculty, Manual of the Govern­ment Organization of Thailand (Bangkok: Mongkul Karnpim, 1961) .

Devsi tha, Somporn, Economic and Trade in Pers pective (Bangkok: Progress Printing Office , 1962) .

Disayavamich, Boonchu. The Development of Rubber Plantation i n Thailand, Unpublished M.A. Thesis (Bangkok: Thamasa t University, 1964).

Ingram, Jame C. California:

Economic Change in Thailand Since 1850 (Stanford, Stanford University Press, 1955).

Landon, K. P. Siam in Transition (Chicago , Illinois : University of Chicago Press, 1939).

Pendleton, Robert L. Thailand: As pec ts of Landscape and Life (New York: Duel l, Sloan arid Pearce, 1963).

143

Reeve, W. D. Public Administration in Siam (London: Royal In s titute of Int ernational Affairs, 1951).

Riggs, F. W. Ecology of Public Administration (London: Asai Publishing House , 1961).

Thompson , Virginia . Thailand: The New Siam (New York: The MacMillan Company , 1941) .

Unakul, Snoh , International Trade and Economic Deve l opmen t of Thailand, Unpubli s hed Ph.D. Di sser tat ion (New York: Columbia University, 1961).

Pe riodicals

Bangkok Bank, Bangkok Mon thly Review, Bangkok.

Hanna, Williard . "Peninsula Thailand: Rubber of Hasdyai and the Tin of Phuke t," American Universi t y Field Staff, Southeast Asia Series, 13, October , 1965 , pp. 1-11 .

Maleewan, Pan. 11Future of Rubbe r Plantation 0\vner in Thailand," ~' 32(1959), pp. 281-283.

Siamrat Weekly Review, 12, April 15, 1965, p. 30. (Rubbe r Industry in Thailand)

APPENDIX

145

Tabl e 35. World consumption of natural rubber, 1900- 1937 (in thousand l ong tons)

Western Year U. S. A. Europe Others World total

1900 20.3 26.7 5.6 52.6 1901 23.0 22.6 6.8 52.4 1902 21.2 22.1 7.4 49.7 1903 23.2 25.3 8 .2 56.7 1904 26 .1 30.6 7 . 4 64.1 1905 27 .0 36.0 7.2 70 . 2 1906 28 . 6 37.0 9 . 0 74.6 1907 28.8 40.4 8 . 2 77.4 1908 32 . 4 32.7 9.2 74 . 3 1909 39.8 37.8 8 . 6 86 . 2

1910 42.2 46.5 10 . 7 99.4 1911 41.7 46 . 5 10.9 99 . 1 1912 55 . 9 50.8 14.0 120.7 1913 52.0 59.9 17.7 129.6 1914 62.3 48.1 6 . 9 117.3 1915 99 . 0 35.7 20 . 9 155. 6 1916 117 . 6 48 . 5 19.6 185.7 19 17 157.4 49.0 9 . 0 215 . 4 1918 160.0 50.6 17.2 227.8 1919 215.0 72.5 17.5 305.0

1920 206.0 68 . 5 19.8 294.3 1921 177.8 67 . 7 32 . 1 277.6 1922 301.5 74 0 5 32.2 408.2 1923 319.4 89.1 37 .1 445.6 1924 328 . 8 93.7 43.8 466.3 1925 388 . 5 119.0 46 . 1 553.6 1926 366 . 2 115.9 59.1 541.2 1927 373 . 0 145.2 77 .4 595.6 1928 437.0 154.2 93.0 684 . 2 1929 467.4 220.8 114.0 802.2

1930 376.0 234.0 98 . 9 708.9 1931 355.2 198 . 3 127.6 681.1 1932 336.7 207 . 0 148.1 691.8 1933 412.4 245 . 7 167.0 825 . 1 1934 462.5 276 .4 199 . 7 938.6 1935 491.5 272.5 175.0 939.0 1936 575 . 0 282.5 189.0 1,046.5 1937 543.6 342 . 8 217 . 7 l 104 . 1

Source: Compiled from Rubber Statistics , 1900- 1937, by P. W. Barker, u. s. Department of Commerce, Trade Promotion Series, No. 181 (Washington, D.C.: Government Printing Office, 1938), pp. 14-17.

Table 36. Wor ld consumption of natural rubber, 1938- 1966 (in th ousand long tons)

Austra - World Year U. S. A. U. K. JaEan Germany France Canada Brazil lia ·Total

1938 437.0 437 . 0 1939 592 oO 592.0

1940- 44 452.4 104ol n.q . 16o 2 12.3 34 . 2 707 17.0 824.0 (ave)

1945 105.4 27.3 19.7 1.0 3 o6 5 . 9 7 . 6 8.5 263 . 0 1946 277.6 96o6 20 ol 1. 7 29 o8 9.6 13.5 15.6 555.0 1947 562o7 153 . 6 17 . 0 8.1 61.2 32.3 14.1 23.0 1,110.0 1948 627 03 193.7 26 .4 45.6 86.5 41.6 15 o6 26 o3 1,423o0 1949 574 . 5 184 . 3 35.3 65.9 91.2 38.3 19.1 27o 7 1,438 . 0

1950 720 o3 219o7 60 . 1 78 . 6 102.6 46.1 23.4 34 0 2 1,7 23o0 1951 454.0 234.2 58 o6 91.5 119 . 3 44.4 26 . 2 35.9 1,515. 0 1952 453.8 197 o3 68 o2 93 . 5 121.6 33 . 5 27.7 28.5 1,470. 0 1953 553 . 5 219 . 6 88.9 106o 2 114 . 8 37 o5 31.8 36 . 0 1,655.0 1954 596 . 3 244 . 3 88.9 130 . 0 127 .0 41.6 37 . 8 45 .1 1, 780.0

1955 634 . 8 248 . 3 87 . 8 147.6 134 . 4 44.3 39o2 48.1 1 , 890.0 1956 562. 1 200 . 2 108 . 9 134 . 0 134 . 6 43 . 1 36.8 38o4 1 , 878.0 1957 538 . 8 186 . 9 130 . 3 136 . 0 135 0 2 40.8 38 . 5 33 o9 1,900.0 1958 484 . 5 182 . 3 128 .2 129 . 3 136 0 9 37 . 1 42o3 35 .4 2,013. 0 1959 555.0 184 . 3 158.8 144 .l 133.5 44o3 44 . 5 37 .8 2,118. 0

1960 479 . 0 179 . 9 165 . 7 145 . 7 127.3 35 . 2 43.8 36 . 9 2,065.0 1961 427 . 3 166.1 176 . 0 135 . 8 127 . 0 31.7 38 o7 29 o0 2,128.0 1962 462 . 8 164 o2 190 . 0 145 . 9 125 . 1 34 . 8 40 . 1 33.3 2,22000 1963 457.2 168.7 192.4 149 . 9 125o4 36.0 35.5 36 o4 2,233 .0 1964 481. 5 180 .9 202.8 152 . 7 125 . 1 40 . 2 32 . 2 38o3 2 260 . 0 ,._.

~

"'

Tab l e 36 . Continued

Austra - World Year u.s .A. U. K. Ja Ean Germany: France Canada Brazil lia Total

1965 514 . 7 183 . 8 198.3 155.4 120 . 6 42 . 8 26.1 36.3 2,355 . 0 1966 549 . 7 183 . 8 205 . 0 149.6 121.0 47 . 0 30.5 35.5 2,470.0

Sou r ce : Commod i ty Year book , several issues .

148

Table 37. World consumption of synthetic rubber, 1940-1966 (in thousand long tons)

United !<est United World Year States Germany Kingdom France Canada Total

1940-44 152.8 65.6 9.0 4.3 5.7 252

1945 693 . 6 22.5 63.8 17 .4 35.9 865 1946 761.7 11.9 30.1 28.7 29.6 913 1947 559.7 7.9 2.8 12.6 29.2 625 1948 442.1 4.4 2.6 7.4 20.6 480 1949 414.4 2.2 2.4 8.3 18.1 450

1950 538 . 3 3.4 2.8 7.4 22.6 580 1951 758.3 5.2 3.9 8.6 26.4 813 1952 807 . 0 9 . 8 4 . 9 11.3 33.6 885 1953 784.8 11.5 4 . 9 12 . 9 35.9 873 1954 636 . 7 17 . 0 9. 4 14.4 30.1 740

1955 894.9 25 . 4 21.3 19.4 40 . 2 1,063 1956 874.4 36 . 0 41.1 31.6 48 . 4 l, 135 1957 925.9 47.0 59.2 49.9 47 . 5 1,260 1958 879 . 9 54.4 65.0 55.1 46.7 1,248 1959 1,073.0 73.4 80 . 2 62.2 57 . 2 1,583

1960 1,079 . 0 104.4 115.8 90.8 55.9 1,798 1961 1,102 . 0 120 .3 121.3 95.5 62 .7 1, 920 1962 1,256.0 129.3 132.8 108.3 73.0 2 ,1 75 1963 1,307 . 0 142.9 143 . 5 123.4 83 . 7 2,360 1964 1,452 . 0 174.3 165.7 139 . 3 90.9 2,748

1965 1,514 . 0 205.2 179.8 145 . 2 96.1 2,9 75 1966 1,672.0 204.0 190.0 163.0 108.0 3,220

Source : Commodity Yearbook, several issues .

Table 38. World natural rubber production (net export) 1910-1937 (in thousand long tons)

Year Malaya Ind ones ia Ceylon India Burma N. Borneo SaJOawak

1910 6.5 2.4 1.6 0 . 2 0.1 1911 10.8 2.3 3.2 0 . 4 0.1 1912 20 .3 3.7 6 . 7 0.7 0.2 0.1 19 13 33 .6 6.4 11.4 1.0 0 . 5 0 . 2 1914 47 . 0 10.4 15.8 1.3 0.6 0.3

1915 72 .2 20 . 0 20.8 2.2 1.2 0.6 1916 96 .0 33.1 24.4 2.8 1.9 1.0 1917 129 . 0 44.0 31.9 4 .0 2 . 4 1.7 1918 112.0 42.0 21.1 4 . 4 2.6 1.5 1919 204.0 85.0 44 . 8 6.6 3 . 9 2 . 2

1920 181.0 80.0 39.0 4 .2 2.2 4 . 1 2.2 1921 151.0 71.0 40.2 3.7 1.7 3.2 2.1 1922 214.0 94 . 0 47 .4 3.2 2.0 3 . 8 3.8 1923 201.0 117.0 37.1 4.4 2.5 4.2 5.7 1924 183.0 149.0 37.4 4.6 3.7 4.6 6 . 7

1925 210.0 189.0 45.7 6 . 3 4 . 7 5 . 4 9.1 1926 286. 0 204.0 58.8 6.5 4.5 5 . 8 9.9 1927 242. 0 22 9.0 55 .4 7 . 0 5.9 6.6 11.2 1928 299 . 0 229.0 58.0 7.2 4.8 7.0 10.6 1929 457.0 255.0 80.3 7.9 5.5 7.4 11.2

1930 443.0 242.0 75.6 6.8 5.2 7. 1 10.6 1931 423.0 257.0 62 . 3 5.4 4.5 6 . 2 10.4 1932 406.0 211.0 49.3 1.1 3.0 5.4 7.1 1933 445.8 282.3 63.8 1.4 3 . 4 7 . 8 11.1 1934 467.4 379.4 79.1 6 . 5 6.3 11.1 17.6

1935 417 . 4 282.9 54.3 9 . 1 4.9 8 . 9 19.3 1936 353 .7 309 . 6 49 . 7 8.6 5.9 8.2 21.0 1937 470 . 0 431.6 70 . 4 9.8 7.2 13.2 25 . 9

Source; Geo10ge Rae, "Statistics of Rubbe r Industry, " Journal of the Royal Statis t ical Socie t y , Pa10t I I , 1938, p . 345.

150

Table 38. Continued

South World Thailand Indo-China Oceania Africa America Mexico Total

0.2 20.0 44.0 18 . 0 93 . 0 0.1 0.2 18.0 43 . 0 15 . 0 93 . 1 0 . 1 0.3 19 .0 49 . 0 12.0 112.1 0 . 1 0 . 2 16.0 43 . 0 6.0 118 .4 0 . 1 0 . 2 8.0 38 . 0 1. 0 122.7

0 . 1 0 . 4 0.1 8.0 40.0 3.0 166. 6 0 . 1 0 . 6 0 . 2 10.0 38.0 2.0 210 . 1 0 . 2 0.9 0 .2 10.0 41.0 2.0 267.3 0 . 1 0.5 0.3 7.0 27 . 0 3.0 221 .4 0.3 2.9 0 . 3 7.0 39 . 0 2.0 398.0

0 . 4 3 .1 0.4 6.0 30. 0 1. 0 353.6 0 . 4 3 . 6 0 . 3 4.0 21.0 302 0 2 0 . 6 4.5 0.1 3.0 24 . 0 400 . 4 1.5 5.1 0 . 3 5 . 6 23.3 1.0 408 . 7 2 . 5 6 . 5 0 . 4 5 .4 25.1 1.5 430 . 4

4.6 7 . 4 0.7 7 . 8 30.2 4 . 0 524 . 9 3 . 5 8.1 1.0 9.5 26.7 4.0 628.3 4.7 8.9 1.3 8.5 30.8 5.0 616.3 4.1 9.1 1.3 7.5 21 .6 3 .0 662.2 4.3 9.5 0.9 6.3 21.3 1.3 867 . 9

4. 7 9.7 1.2 4.9 14.3 1.0 826.1 3.6 11.0 0.9 3.5 12.2 800 . 0 3 .0 13 . 5 0 . 8 2.0 6 . 5 708 .7 7.0 17 . 3 1.2 2.3 10.1 853.5

17. 7 19. 6 1.4 3 . 5 9.1 0 .4 1,019. 1

28 .3 28.7 1.5 5.0 12 . 2 0.5 872.6 34.6 40 . 8 1. 6 6 . 1 14 . 6 1.2 855.6 35 . 6 43 . 4 1.6 7.7 16.0 2.7 135.1

Table 39. World production of natural rubber, 1938-1966 (in thousand l ong tons)

Yea r Malala Indonesia Thailand Cellon Vietnam Cambodia

1938 345.3 300.9 41.6 49.3 59.2 1939 361.6 369.9 41.8 61.6 65.2 1940 547.2 543.2 90.0 64.0

1941 600.0 650.0 99.5 75.0 1942 155.0 200 .0 101.5 76 . 2 1943 75.0 100.0 105.5 70.4 1944 25.0 50 . 0 98.5 60 .4 1945 8.6 10.0 97.5 12.0

1946 403 . 7 175.0 94.0 20 . 0 1947 646.4 278 . 0 89 . 0 38.1 1948 698.2 432 .3 95.0 44.0 1949 671.5 431.8 89.5 43.0 1950 694.1 696 . 5 112 . 2 113.5 33.4 15.1

1951 605 . 3 814.4 108.8 105.0 36.7 15.4 1952 584 .2 750.5 97 . 9 96.5 44.9 18.3 1953 574 . 4 694 . 6 95 . 6 98.6 52.4 22.2 1954 586.5 744.4 116.7 93 . 9 54 . 1 24 . 0 1.955 638.7 737.1 130.2 93.8 65 .3 27.4

1956 626 . 0 686 . 7 134.6 95.4 69 . 1 31.6 1957 637 . 5 684.5 134.0 98.2 68.6 31.2 1958 662.9 685 . 2 138.4 100.2 70.5 33.1 1959 697.8 693.5 171.3 91.7 74 . 2 33 . 9 1960 708.4 610 . 5 168.2 97.3 75.4 36 . 5

1961 736.7 671.4 183.2 96.0 77.9 39 .3 1962 751.6 670 .8 192.3 102.4 74.0 40.9 1963 788.5 573.1 186.8 103 . 1 70.7 40 . 1 1964 825 . 3 638.4 218 . 2 109 .8 73 . 3 45.1 1965 860.7 705.7 213 . 1 116.4 60.0 48.1

1966 928 .5 700.0 210.0 128.9 50.7 50 . 5

Source: Rubber Statistical Bulletin, several issues.

152

Table 39. Continued

Other Latin World India Sarawak Africa Brazil America Total

14.7 27.3 12.0 871.5 16.3 36.4 14.7 989.7 l7 .5 35.0 16.1 18.6 7.4 1,417.5

17 . 0 35.0 16.9 16.9 8.9 1,600.0 16.0 10.0 29.6 22.2 13 . 6 640.0 16.6 5.0 45.0 23 . 1 18 .8 465.0 17.3 54.8 29.4 20.5 360.0 16.1 53.6 24.1 23.0 250.0

15.8 9.0 46.8 23 . 7 16.0 837.5 16.4 36.8 38 . 5 25.9 9.0 1,260.0 15.4 39 . 7 42.0 20 . 2 9.0 1,525 . 0 15 .6 39 . 5 45 . 0 21.3 6 . 0 1,490.0 15.6 55.6 55.3 19.4 7 . 5 1,860 . 0

17 . 1 42.4 72.0 20.8 9.0 1,885.0 19.9 31.8 73 . 5 26 . 5 9.0 1,790.0 21.1 24.0 77.0 26.3 9 . 0 1,727.5 21:5 23.4 82.8 21.9 6 . 0 1,810 . 0 22.5 39.2 98.8 21.3 6. 0 1,918 . 0

23.4 40.7 113.5 23 . 7 6.0 1,893.0 23.8 41.0 116 . 3 24 . 0 6.0 1,905 . 0 24.3 38.9 123.3 20 . 3 6.0 1,943 . 0 23.4 43.4 141.8 21.1 7 .0 2,043.0 24 . 8 49.7 147.0 22.7 7 . 0 1,990.0

26.6 47.3 142.0 22.4 7. 0 2,095.0 30.6 43 .4 150.8 21.3 7 . 0 2,130.0 36.6 44 . 6 151.8 20.3 7.0 2,068.0 43.5 44.7 158.8 27 . 9 7.0 2,240.0 48.6 39.9 153 . 5 28.8 7. 0 2,328 . 0

51.5 35.0 170.0 25 . 5 7 .o 2 408 . 0

153

Table 40. World produc tion of synthetic rubber, 1940-1966 (in thousand long tons)

West World Year U.S . A. Canada Germany U.K. Italy Japan France Total

1940 2 . 6 39.8 42 .4 1941 8.1 69.4 77.5 1942 22.4 98.1 120 . 2 1943 231.7 2.5 115.8 350.0 1944 764.1 34.8 101. 6 900 . 5

1945 820 .4 45.7 866.1 1946 740 .0 51.0 15.6 806.6 1947 508.7 42 .4 8.2 559.3 1948 488 .3 40 . 5 3.4 532 .2 1949 393.7 46.6 440.3

1950 476.1 58.4 534.6 1951 62.3 l.O 908.4 1952 798 . 5 74 . 3 4 . 9 877.8 1953 848.4 80.9 6.3 935.6 1954 622.9 86.6 7.0 716 . 4

1955 970 . 5 103 . 9 10.9 1,085.0 1956 1,080 . 0 120 . 7 10.7 1,211. 0 1957 1,118.0 132.1 11.6 0.8 1,263.0 1958 1,055.0 135.0 22.7 11.3 20.0 1 , 243.0 1959 1,380 . 0 100.7 48 . 1 57.0 47 . 0 1.2 5.9 1,633.0

1960 1,436 . 0 159.7 79.8 90 . 0 70.0 18.8 17.2 1 , 880 . 0 1961 1,404 . 0 164 . 5 85.6 106.0 82 . 0 50.0 40 . 0 1,975 . 0 1962 1,574.0 168.3 88 . 2 117 . 0 86 . 0 68 . 0 63 . 0 2,240.0 1963 1,608 . 0 178.7 106 . 5 125.0 94 .0 90 . 0 97.0 2,438 . 0 1964 1,765.0 197 . 5 135.7 153 . 0 110.0 120.0 128 . 0 2,803 . 0

1965 1,814.0 203.0 161.4 171.7 118.0 158.8 146 . 0 3,015.0 1966 1 969 . 0 200 . 0 170 . 9 3 318.0

Source: Rubber St atistical Bulletin , severa l issues.

154

Table 41 . Yearly average price of crude rubber (ribbed smoke s sheet plantation rubber) in New York (in cent per pounds)

Year Price Year Price Year Price

1900 99 .5 1920 35.9 1940 20 . 10 1901 88.5 1921 16. 5 1941 22.30 1902 80.5 1922 17.3 1942 22 . 50 1903 96.5 1923 30.7 1943 22.50 1904 112.5 1924 26.4 1944 22.50

1905 126.5 1925 73 .0 1945 22.50 1906 125.5 1926 48.7 1946 22 . 50 1907 103.0 1927 37.8 1947 20.8 1908 98.0 1928 22 .3 1948 21.9 1909 167.5 1929 20. 48 1949 17.6

1910 206.6 1930 10.24 1950 41.3 1911 141.3 1931 6 .12 1951 60 . 9 1912 121.6 1932 3.43 1952 38.6 1913 82 . 0 1933 5.90 1953 24.1 1914 65.3 1934 12.94 1954 23.4

1915 65.7 1935 12.32 1955 39.0 1916 72.5 1936 16.43 1956 34 . 3 1917 72.2 1937 19.37 1957 31.1 1918 60 . 2 1938 14.68 1958 28.2 1919 48 . 5 1939 17 . 66 1959 36.5

1960 38.5 1961 29 . 6 1962 28.5 1963 26.3 1964 25.2

1965 25 . 7 1966 23.6

Source: Commodity Yearbook, several i ssues.

155

Table 42. Synthetic rubber prices (in cent per pound)

Year GR- S Neoprene Butyl

1940 65 1941 65 1942 50 65 33 1943 26- 3/8 44-1/4 19-7/8 1944 18-l/2 27 - 1/2 15-1/2

1945 18-l/2 27-l/2 15-1/2 1946 18-1/2 27-1/2 18 1947 18-1/2 29 - 3/8 18-1 /2 1948 18-1/2 32 18-1 /2 1949 18-1/2 32 18- 1/2

1950 19 34 18- 11/16 1951 25 38 20-3/4 1952 23 - 1/2 38 20-3 /4 1953 23 40 21-5 /16 1954 23 41 22-1/2

1955 23 41 23 1956 23 41 23 1957 23 41 23 1958 23 41 23 1959 23 41 23

1960 23 41 23 1961 23 41 23 1962 23 41 23 1963 23 41 25 1964 23 41 25 1965 23 41 25

Source : Rubber Statistical Bulletin.

156

VITA

Candidate for the Degree of

Master of Science

Thesis: A Study of the Natural Rubber Industry, with Special Reference t o Thailand

Major Field: Economics

Biographical Informati on:

Personal Data: Born at Supanburi, Thailand, November 17, 1931, son of Kieng and Sie Vayagool; married Charunee Vayagool; one child --Barnrularp .

Education: Attended Prasatvidhya School, Supanburi, Thailand; received B. Comm. degree from Thammasat University, Bangkok, Thailand, in 1956; B. B. A., Thammasa t University in 1957; completed requirements for the Master of Science degree at Utah State University in 1967.

Professional Experience: 1963 to present, member of the Auditor Association, Bangkok, Thailand; 1955- 1966, Deputy Member of the Audit Council, Bangkok, Thailand.